plaintiff. 1. The defendants shall pay the plaintiff an amount of RMB 2,802,849. 2. The defendants shall pay the plaintiff's costs, as agreed or assessed, of and incidental to these proceedings.
Key principles
A judgment of a Chinese court may be enforced in New South Wales at common law where (1) the foreign court exercised jurisdiction of the requisite type in the international...
A forum court must satisfy itself of the existence of the jurisdictional and other threshold requirements for enforcement even where the defendant has conceded aspects of the...
A defendant cannot reopen the merits of a foreign judgment in enforcement proceedings where the matter was or could have been raised in the foreign proceedings; alleged...
A court will, as a general rule, enforce interest as ordered by the foreign judgment unless that element is penal in nature and therefore contrary to public policy; where no...
Issues before the court
Whether a judgment of the Qingdao Intermediate People's Court (China) can be enforced in New South Wales at common law.
Whether the local court must independently determine jurisdiction despite defendants' concessions about the foreign court's jurisdiction.
Plain English Summary
The NSW Supreme Court (Rothman J) enforced a final Chinese judgment against two NSW-resident defendants. The Court held that the common law requirements for recognition and enforcement of foreign judgments were satisfied (jurisdiction, finality, identity of parties, fixed sum). Defendants' claims they had repaid parts of the debt were matters for the Chinese courts and were not established in NSW, so enforcement proceeded. The Court also awarded the interest ordered by the Chinese court (including Article 253 interest), resulting in a judgment for RMB 2,802,849 plus costs.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,974 words · generated 15/06/2026
What happened
The plaintiff, Mr Dexu Bao, an Australian plaintiff but a Chinese citizen, advanced four loans in China to Mr Xin Tian and his wife Ms Mei Qu between December 2012 and February 2013, totalling RMB 2,550,000 (Loans section).
Whether alleged repayments (set-offs) advanced by defendants can be used to defeat enforcement of the foreign judgment.
Whether the Article 253 interest awarded by the Chinese court is penal and therefore unenforceable on public policy grounds in New South Wales.
Cited legislation
5 cited instruments linked from this judgment.
The plaintiff sued in China on 24 April 2014. The People's Court of Laoshan District, Qingdao, entered a First Instance Judgment in November 2014 in the plaintiff's favour. The defendants did not attend that first instance hearing but the judge proceeded to decide the matter on the merits (First Instance Judgment, p.1 and p.4).
The first defendant appealed. On 10 September 2015 the Qingdao Intermediate People’s Court of Shandong Province (the Intermediate Appeals Court) dismissed the appeal save in respect of one loan and reduced the award so that the Final Chinese Judgment ordered the defendants to pay RMB 2,050,000 plus interest (Chinese Proceedings [4]; see also Interest [1]).
The plaintiff recovered RMB 19,205 in China, leaving an unpaid balance (Bao Affidavit [7], [8]).
The plaintiff commenced enforcement proceedings in the NSW Supreme Court by summons filed 13 September 2019. The defendants were served in NSW and ultimately filed a Points of Defence admitting the authenticity of the Chinese judgment and conceding that the Qingdao Intermediate Court had exercised appropriate jurisdiction and that the Final Chinese Judgment was final and for a liquidated sum of RMB 2,050,000; however, they alleged prior repayments totalling RMB 1,750,000 which they said reduced the amount owing (Points of Defence; Alleged Repayments [19]).
At the NSW hearing (16 April 2020), the Court refused an adjournment application and heard the matter. Rothman J concluded that the four common law prerequisites for enforcement were satisfied, rejected the defendants’ asserted repayments as a means to reopen the merits of the Chinese proceedings, and held there was no pleaded or proven fraud. The Court also considered whether the Chinese court’s Article 253 interest was penal and therefore unenforceable; finding no evidence of a punitive public element, the Court enforced the Chinese interest award. Judgment was entered for the plaintiff in RMB 2,802,849, together with costs (Orders).
Why the court decided this way
Threshold law applied: Rothman J relied on the established common law framework for enforcing foreign judgments in Australia. The Court expressly set out the four elements that make a foreign judgment prima facie enforceable: (1) foreign court had jurisdiction in the international sense; (2) the judgment is final and conclusive; (3) identity of parties; and (4) the judgment is for a fixed, liquidated sum ([26]).
Jurisdiction: The Court accepted that either the defendants were served in China or, in any event, submitted to the jurisdiction by participating in the Chinese appeal process. The Court emphasised that it must be independently satisfied about jurisdiction even where the defendants conceded it; concessions do not relieve the forum court of the duty to determine such issues for itself (Consideration [2]--[6]).
Finality and identity of parties: The Final Chinese Judgment plainly stated it was final and there was no evidence of any further domestic step in China to vary it. The parties in the NSW proceedings were the same individuals as in the Chinese proceedings (Consideration [6]--[7]).
Alleged repayments / attempt to reopen merits: The defendants sought to rely on alleged repayments and other benefits (car, wedding) as set-offs. Rothman J treated these as merits issues that either had been or could have been raised in the Chinese proceedings; in particular one alleged payment of RMB 200,000 was apparently raised on appeal and rejected as outside the scope of the appeal ([10]--[13]). There was no evidence here of fresh material not reasonably discoverable in China or of fraud; accordingly, the defendants could not use these allegations to defeat enforcement in NSW (Consideration [8]--[16]).
Fraud exception: The Court reiterated that fraud is a recognised exception but must be pleaded with particularity and strictly proved, and is typically established by evidence not reasonably discoverable at the time of the foreign proceedings. No such pleading or proof was made (Relevant Defences).
Interest: The Final Chinese Judgment included two layers of interest: General Interest up to 20 September 2015 and Article 253 doubled-rate interest thereafter. The Court recognised that Australian courts will not enforce penal laws; punitive aspects of foreign awards can be severed (Schnabel v Lui). However, Rothman J found no evidence that Article 253 Interest had a public/punitive element in this case and that the rate was not materially dissimilar to the general rate. On that basis the Court enforced the Chinese interest award and accepted the plaintiff’s calculations leading to total judgment for RMB 2,802,849 (Interest; Penal Interest; Calculations).
Before and after state of the law
Before:
The law, as stated in precedent, was that foreign judgments may be enforced at common law when the four classic common law requirements are met, and that defences such as satisfaction, fraud, or public policy (including penal character) may prevent enforcement. Authorities cited by the Court (Benefit Strategies, Schnabel, Carl Zeiss, etc.) already established these core principles ([26]; Relevant Defences).
After:
Rothman J applied those settled principles to a Chinese judgment and reaffirmed several practical points:
Courts must satisfy themselves of jurisdictional facts even where concessions are made on those points (Consideration [2]--[5]).
Allegations of repayments or offsets that could and should have been raised in the foreign proceedings cannot be used to reopen the merits of a final foreign judgment in enforcement proceedings (Consideration [8]--[16]).
A foreign court’s award of interest, even where labelled in domestic law as an enhanced or 'Article 253' rate, will be enforced unless shown to have been penal or to have a public punitive element (Penal Interest). Where no such evidence is placed before the enforcement court, enforcement of the interest element is appropriate.
Thus, the decision does not break new legal ground but confirms the application of established common law principles to Chinese judgments and underlines procedural and evidential expectations in enforcement proceedings.
Key passages with plain-English translation
Passage (legal): "At common law, a foreign judgment is prima facie capable of recognition and enforcement if the following requirements have been met: ... (1) ... jurisdiction ... (2) the judgment must be final and conclusive; (3) identity of parties; and (4) the judgment must be for a fixed, liquidated sum." ([26])
Plain-English: The Court will normally enforce a foreign judgement if the foreign court had proper jurisdiction over the defendant, the foreign decision is final, it's the same defendant in both proceedings, and the judgment requires payment of a specific money amount.
Passage (fact/concession): "The defendants admit the 'authenticity' of the Final Chinese Judgment ... concede that ... the Appeal Judgment is 'final and conclusive' ... 'for a liquidated sum in the amount of RMB 2,050,000' ... they are ... 'judgment debtors'." ([19])
Plain-English: The defendants formally accepted the Chinese judgement as genuine, final and for a specific sum, and accepted they are the debtors named in it.
Passage (on reopening merits): "The effect of seeking to rely on the Alleged Repayments now is that the defendants impermissibly seek to reopen the merits of the dispute as finally determined by the Appeals Court in the Final Chinese Judgment." ([14])
Plain-English: Trying to use the alleged repayments now is an attempt to re-argue the same issues the Chinese court already decided; you cannot do that in enforcement proceedings.
Passage (on interest): "In the circumstances of this case, no evidence is before the Court ... whether the imposition of Article 253 Interest has a 'public element' ... 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." (Penal Interest)
Plain-English: Because no evidence showed that the doubled interest was intended as a punitive public penalty, the Court accepted and enforced the Chinese interest award.
What fact patterns trigger this precedent
Enforcement in NSW of a final monetary judgment obtained in China (or any non-designated jurisdiction) where the judgment is for a specified sum and the defendant: (a) was served in the foreign jurisdiction; or (b) appeared or otherwise submitted to the foreign court’s jurisdiction on the merits.
Cases where the defendant in enforcement proceedings seeks to raise merits defences (set-offs, payments, counterclaims) which either were or reasonably could have been raised in the foreign proceedings.
Situations where an award of interest or enhanced interest by a foreign court is challenged as being penal in character; this decision signals that without evidence of a public/punitive element the enforcement court will generally enforce the foreign interest award.
Practical triggers for litigation strategy:
If a defendant intends to resist enforcement on the basis of set-offs or repayments, they must show that the evidence was not available at the foreign trial or demonstrate fraud, and must plead and prove fraud with particularity.
A plaintiff seeking enforcement should adduce the foreign judgment, evidence of identity of parties, any evidence that defendants were served or submitted to jurisdiction, and calculations of interest if the foreign judgment awards it.
How later courts have treated it
This judgment itself does not contain subsequent judicial treatment (it is a first-instance NSW Supreme Court decision dated 19 May 2020). The Court applied established authorities; it did not purport to depart from or overrule any High Court or appellate authority. For any authoritative subsequent treatment, researchers must search later reported decisions and citators. The judgment reinforces well-established common law principles and will be a persuasive NSW Supreme Court authority for similar enforcement matters involving Chinese judgments.
Still-open questions
Fraud standard and new evidence:
The Court reiterated the preferable approach that fraud for enforcement-defeating purposes is established where there is evidence not reasonably discoverable at the foreign proceeding (see footnote [2] and Relevant Defences). The precise boundaries of what constitutes evidence not reasonably discoverable remain fact-specific and may produce divergent results in future cases. Lower courts may continue to debate whether some forms of late-discovered evidence are sufficiently novel to permit reopening.
Concessions on jurisdiction:
Rothman J insisted the court must make its own determination on jurisdictional questions despite party concessions (Consideration [2]--[5]). How vigorously appellate courts will insist on independent inquiry where parties expressly concede jurisdiction remains to be further developed. There may be procedural efficiency tensions where litigants concede to avoid contest; courts will weigh that against their duty to be satisfied.
Characterisation of Article 253 interest:
Although this Court enforced Article 253 Interest absent evidence of a public/punitive element, different fact patterns could see an enhanced statutory interest mechanism characterised as penal and non-enforceable. The decision leaves open precisely what sorts of statutory enhancement or formula will be treated as punitive rather than compensatory; future cases will test the boundary.
Evidentiary expectations in enforcement proceedings:
The decision emphasises that a defendant resisting enforcement should adduce evidence of any asserted repayments or set-offs in the enforcement court if they were not, or could not have been, presented in the foreign proceedings. The threshold for proving such evidence (and demonstrating why it could not have been presented earlier) will be a recurrent and contested issue.
Practical takeaway: parties seeking to enforce a foreign monetary judgment in NSW should be ready to prove the four common law criteria, and advance clear interest calculations if interest is claimed. Defendants resisting enforcement by reference to prior payments must produce evidence showing either that the payments were not reasonably discoverable in the foreign proceedings, or must plead and prove fraud with particularity. Where foreign interest is claimed at an elevated statutory rate, enforcement courts will ask for evidence on whether the interest is punitive or compensatory before refusing enforcement on public policy grounds.
Catchwords
[1927] HCA 23
Bank Polska Kasa Opieki Spolka Akcyjna v Opara (2010) 238 FLR 309[2010] QSC 93
Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279[1990] HCA 11
Benefit Strategies Group v Prider (2005) 91 SASR 544[2014] FCA 442
Colt Industries Inc v Sarlie (No 2) [1966] 1 WLR 1287
Derry v Peek (1889) 14 App Cas 33759 ER 111
Quarter Enterprises Pty Ltd v Allardyce Lumber Company Ltd (2014) 85 NSWLR 404
Judgment (14 paragraphs)
[1]
Solicitors:
King & Wood Mallesons (Plaintiff)
Abu Legal (First & Second Defendants)
File Number(s): 2019/286500
[2]
Judgment
HIS HONOUR: By Amended Summons filed 15 October 2019, the plaintiff, Dexu Bao, seeks the enforcement of a judgment of the Qingdao Intermediate People's Court of Shandong Province, China, which was a judgment said to have been issued on 10 September 2015 against the defendants to these proceedings, Mei Qu and Xin Tian.
[3]
The Loans
The plaintiff and the defendants in these proceedings are citizens of China. The plaintiff knew the second defendant (Mr Tian) socially and through him came to know the first defendant (Ms Qu), who is the wife of the second defendant.
From December 2012 to March 2013, the plaintiff allegedly made four loans to the defendants, totalling RMB 2,550,000. The plaintiff claimed that the loans were in the following amounts and that they were advanced at the following times:
1. RMB 1,450,000 on 26 December 2012;
2. RMB 100,000 on 25 January 2013;
3. RMB 500,000 on 19 February 2013; and
4. RMB 500,000 on 22 February 2013.
(together, "the Loans")
The defendants allegedly did not repay the Loans and, on 24 April 2014, the plaintiff commenced proceedings in China for the recovery of the loaned funds.
[4]
The Chinese Proceedings
On 23 November 2014, the People's Court of Laoshan District Qingdao handed down a judgment in favour of the plaintiff, ordering the defendants to pay RMB 2,550,000 plus interest to the plaintiff ("First Instance Judgment"). An English translation of the First Instance Judgment records that the defendants "did not appear before Court after the lawful summons had been served", nevertheless, the "Court formed a collegiate panel in accordance with the law and carried out a public hearing of the case": First Instance Judgment, p.1. The judgment further records that "the Court carried out trial according to law ... [in the defendants'] absence": First Instance Judgment, p.4.
In response to a question from the Court, as presently constituted, Counsel for the plaintiff clarified that the hearing culminating in the First Instance Judgment was decided on the merits, notwithstanding the absence of the defendants, such that the First Instance Judgment was not relevantly equivalent to a "default judgment" within the meaning of Part 16 of the Uniform Civil Procedure Rules 2005 (NSW): Tcpt, p 4, l 26-35.
On 6 March 2015, the first defendant appealed against the First Instance Judgment. The second defendant was not an appellant, although he was apparently represented by counsel at the hearing of the appeal: Affidavit of Dexu Bao dated 8 January 2020 ("Bao Affidavit"), [6].
On 10 September 2015, the Qingdao Intermediate People's Court of Shandong Province delivered a judgment ("Final Chinese Judgment") dismissing the appeal, save in respect of one loan. The Court varied the amount to be paid by the defendants, ordering them to pay RMB 2,050,000 plus interest to the plaintiff. Further details of the orders made in respect of interest are recited below at paragraph [56].
The defendants have allegedly failed to pay the judgment amounts. The plaintiff took steps to enforce the Final Chinese Judgment against the defendants in China. He recovered the sum of RMB 19,205: Bao Affidavit, [7]. The plaintiff submits that the balance of the judgment amount, being an amount of RMB 2,030,795 plus interest, remains unpaid: Bao Affidavit, [8].
[5]
The New South Wales Proceedings
The proceedings in New South Wales were commenced by Summons filed 13 September 2019.
The defendants are resident in New South Wales and they were personally served with the Summons and Amended Summons: Affidavit of Daisy Mallett filed 22 November 2019 ("Mallett Affidavit"), [5] - [8].
The proceedings were set down for final hearing on 6 February 2020. At that stage, the defendants had not entered any appearance, taken any step in the proceedings or responded in any way to the plaintiff or his legal representatives.
On 6 February 2020, the second defendant appeared at the hearing before N Adams J, with his son acting as interpreter. At that time, the second defendant was not legally represented. N Adams J adjourned the proceedings until 14 February 2020, to allow the defendants to consider the plaintiff's submissions and to secure legal assistance.
On 12 February 2020, the defendants filed a Notice of Appointment of Solicitor.
On 14 February 2020, Hamill J made various timetabling orders including for the defendants to file and serve any evidence upon which they intended to rely on or before 20 March and any submissions on or before 9 April.
The defendants filed a Points of Defence dated 6 March 2020 but they did not file or serve any evidence or written submissions.
During the hearing on 16 April 2020, Counsel for the defendants explained that, following the filing of the Points of Defence, neither he nor his instructing solicitor had been able to obtain instructions from their clients, the defendants, until the day before the hearing. At that time, the defendants instructed their legal representatives to appear at the hearing and seek a further adjournment. In an ex tempore judgment, the Court, as presently constituted, refused the adjournment application, giving reasons, and the matter proceeded to hearing.
In their Points of Defence (at [1] - [3]), the defendants admit the "authenticity" of the Final Chinese Judgment, as pleaded by the plaintiff, and "concede" that:
1. the Qingdao Intermediate People's Court of the Shandong Province "exercised jurisdiction of the requisite type in accordance with the law of the People's Republic of China";
2. the Appeal Judgment is "final and conclusive";
3. the Appeal Judgment is "for a liquidated sum in the amount of RMB 2,050,000"; and
4. they are, for the purposes of these proceedings, "judgment debtors".
[6]
Principles for Enforcement of Foreign Judgments
Foreign judgments may be enforced in Australia either at common law or pursuant to the statutory regime under the Foreign Judgments Act 1991 (Cth).
The statutory regime applies where a country has been designated as a jurisdiction of substantial reciprocity under the Regulations. The People's Republic of China has not been so designated: see the Foreign Judgments Regulations 1992 (Cth), sch 1. [1]
Thus, the judgments of Chinese courts are not enforceable in Australia through statutory means. However, decisions of Chinese courts may be enforceable in Australia under the common law procedure for the enforcement of foreign judgments.
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 v Prider (2005) 91 SASR 544; [2005] SASC 194 per Bleby J at [18]; Schnabel v Yung Lui [2002] 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, 10th ed, 2020) ("Nygh") at [40.2].
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].
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. It 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.
[7]
Relevant Defences
It is defence to an action to enforce a foreign judgment that the plaintiff elected to sue abroad and that the judgment obtained has been wholly satisfied: Kohnke v Karger [1951] 2 KB 670 at 675 per Lynskey LJ; Nygh [40.49]; Fulcrum Securities Ltd Lake [2009] NSWSC 1202.
A forum court may also refuse to enforce a foreign judgment where the foreign judgment was obtained by fraud (including equitable fraud) by the parties or by the foreign court: Keele v Findley (1990) 21 NSWLR 444 at 457-8 per Rogers CJ Comm D; Price v Dewhirst (1837) 8 Sim 279; 59 ER 111; Suzhou Haishun Investment Management Co Ltd v Zhao and Ors [2019] VSC 110, [93]. Fraud has not been raised by the defendants in these proceedings.
At common law, actual fraud means an act or omission done for an intentionally deceitful purpose or with reckless indifference as to the truth or falsity of a representation: Derry v Peek (1889) 14 App Cas 337; [1886-90] All ER Rep 1. Proof of perjury by a witness is insufficient unless the plaintiff perpetrated the fraud by procuring the witness' perjury: Benefit Strategies Group v Prider (2005) 91 SASR 544; [2005] SASC 194 per Bleby J at [37].
It falls to the defendant to establish fraud, once the plaintiff has established the prima facie enforceability of the judgment: Stern v National Australia Bank; National Australia Bank Ltd v Pollack [1999] FCA 1421 at [133] per Tamberlin J.
The preferable view seems to be that fraud, on the part of the party in whose favour the judgment has been given, must be an allegation of fraud based on evidence not available or not reasonably discoverable at the time of the foreign proceedings: Keele v Findley (1990) 21 NSWLR 444 per Rogers CJ Comm D; XPlore Technologies Corporation of America v Tough Corp Pty Ltd [2008] NSWSC 1267 at [19]; Quarter Enterprises Pty Ltd v Allardyce Lumber Company Ltd (2014) 85 NSWLR 404; [2014] NSWCA 3 at [136]-[147]. [2]
It should be noted that any claim based on fraud must be pleaded distinctly and with particularity: Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 573; Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 285, 295; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538. Moreover, fraud must be strictly proved: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538.
[8]
Consideration
As previously stated, the plaintiff asserts that the defendants, by their Points of Defence, have admitted all aspects of the plaintiff's case save for one matter, being a claim that the defendants made the Alleged Repayments, in discharge of the debt upon which the Final Chinese Judgment is based.
During the hearing, there was discussion between the parties and the Court, as presently constituted, as to the effect of the defendant's 'concessions'. Counsel for the plaintiff submitted that, in view of the concessions, it was unnecessary for the Court to be independently satisfied of the matters set out at paragraph [26] above, as the concessions were "concessions of fact": Tcpt, p 13 l 46 - p 14 l 20. With respect, that is not correct.
By way of example, it was not conceded that the defendants were personally served in the foreign jurisdiction (a concession of fact, or perhaps, more accurately, a mixed question of fact and law), rather, it was conceded that the Intermediate Appeals Court exercised jurisdiction of the relevant type (a question of law). Accordingly, whether or not agreements on such questions of law are reached, as commendable as that may be, it does not relieve the Court of the requirement on it to determine, for itself, the jurisdiction that it is exercising.
Despite that, the Court agrees with the alternative submission advanced by the plaintiff that, in any event, the evidence establishes that the four elements required for this Court to enforce a foreign judgment at Common Law have been satisfied.
As earlier stated, the defendants appear to have been resident in China and served with process there. The defendants did not contest that they were properly served in respect of the Chinese proceedings. The first defendant, at least, may be taken to have submitted to the jurisdiction of the appeal Court by commencing the appeal and both defendants appear to have been represented on appeal. In my view, each defendant, whether or not properly served, has submitted to the jurisdiction of the Appeal Court.
Whilst the first instance Chinese judgment was heard in the absence of the defendants, it appears to have been determined on the merits. Moreover, the Final Chinese Judgment determined the matters in controversy in the dispute between the parties in respect of the Loans and the judgment itself notes that it is "final": see Final Chinese Judgment, p. 7. There is no evidence of any step taken in the Chinese proceedings subsequent to the Final Chinese Judgment.
[9]
Interest
As earlier stated at paragraph [8] above, the Final Chinese Judgment determined that interest was payable by the defendants to the plaintiff on the judgment amount of RMB 2,050,000.
Pursuant to a direction from the Court, as presently constituted, during the hearing on 16 April 2020, the plaintiff filed a Note on Interest dated 20 April 2020. By way of email to my Chambers on 12 May 2020, the defendants indicated that they did not disagree with the calculations set out in the plaintiff's Note and they did not provide the Court with any additional materials.
According to the Final Chinese Judgment at p.7, interest was payable, as follows:
1. from the date on which proceedings were commenced, being 24 April 2014, until 10 days from the effective date of the judgment, being 20 September 2015, at the "benchmark interest rate for the loans in the same type as issued by the People's Bank of China for the same period" (General Interest); and
2. if the judgment debt was not satisfied by 20 September 2015, then "the interest on the debt during the period of delay in fulfilment shall be paid at the double amount in accordance with the provisions of Article 253 of the Civil Procedure Law of the People's Republic of China" (Article 253 Interest).
The plaintiff referred the Court to the applicable "interpretation" of the application of Article 253 Interest issued by the Supreme People's Court of China which states that such interest is to be calculated in accordance with the following formula: principal amount (i.e. judgment amount) times number of days not paid times 0.0175% per day. [3]
[10]
Penal Interest?
The plaintiff seeks pre-judgment interest on two, alternative, bases, namely (1) interest in accordance with the terms of the Final Chinese Judgment or (2) interest in accordance with s 100 of the Civil Procedure Act 2005 (NSW).
In the ordinary course, it is appropriate to make an order for pre-judgment interest in accordance with the foreign judgment. However, 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.
[11]
Calculations
The plaintiff's interest calculations indicate that "for ease of calculation, the plaintiff has applied the relevant interest calculation to the figure of 2,030,795 for the entirety of the relevant period": Note on Interest at [8]. I accept and will adopt this approach.
For the purposes of the General Interest calculation, the plaintiff provided a translated copy of a table of benchmark interest rates published by the People's Bank of China for the relevant period, issued by the Monetary Policy Department on 24 October 2015. The document indicates that different interest rates are applicable for different 'types of loan', to use the language of the Final Chinese Judgment.
The plaintiff submits that the rates for loans described as "Over 5 years" are applicable here on the basis that "the judgment amount has remained unpaid for a period of more than 5 years, being the period up to judgment in the present proceedings": Note on Interest, [7(c)]. Alternatively, the plaintiff submits that the applicable rates are those for loans described as "1-3 years (including 3ys)" on the basis that "the judgment amount has remained unpaid for a period between 1 and 3 years, being the period up to 20 September 2015": Note on Interest, [7(d)].
The First Instance Judgment explains at p.4 that there was no evidence before the Court as to the rate of interest applicable to the Loans. [4] As a consequence, it was determined that the Loans did not bear any interest, however, the defendants were nevertheless required to pay General Interest from the date on which the plaintiff commenced the proceedings until the effective date of the judgment. The Final Chinese Judgment did not disturb this determination on interest otherwise than to state that such General Interest was payable until 20 September 2015. It seems to me that the deemed term of the loan was around 1 year and 5 months for the purposes of the award of General Interest and therefore, the "type" of loan in the table of benchmark rates is the loan described as "1-3 years (including 3ys)".
The plaintiff's calculations for General Interest, which I accept are correct, are set out in the table below:
Interest rates applicable to amounts of 1-3 years duration
Date Range No. of days Interest Rate Interest amount (RMB)
24/04/2014 - 212 6.15% 72,541.11
21/11/2014
22/11/2014 - 99 6% 33,049.10
28/02/2015
01/03/2015 - 71 5.75% 22,714.30
10/05/2015
11/05/2015 - 48 5.50% 14,688.49
27/06/2015
28/06/2015 - 59 5.25% 17,233.94
25/08/2015
26/08/2015 - 25 5% 6,954.78
20/09/2015
SUM 167,181.72
[12]
In relation to Article 253 Interest, the calculation is 1702 days (being the number of days from 21 September 2015 until 19 May 2020) times 2,030,795 times 0.0175% which equals RMB 604,872.29.
Accordingly, the plaintiff is entitled to judgment in the amount of RMB 2,802,849, being the addition of (1) the amount of the Final Chinese Judgment less the amount recovered by the plaintiff in China (RMB 2,030,795), (2) the General Interest amount (RMB 167,181.72) and (3) the Article 253 Interest amount (RMB 604,872.29).
Hereafter, interest will accrue at the rate applicable to a judgment of the Supreme Court and s 101 of the Civil Procedure Act 2005 applies. The interest payable under s 101 of the Civil Procedure Act is not to be calculated on the interest payable under the Final Chinese Judgment. If not otherwise clear, interest is not payable on interest and, further, the interest payable under s 101 of the Civil Procedure Act shall be in substitution for and not in addition to any interest otherwise payable for the same period.
[13]
Orders
The Court makes the following orders:
1. The defendants shall pay the plaintiff an amount of RMB 2,802,849.
2. The defendants shall pay the plaintiff's costs, as agreed or assessed, of and incidental to these proceedings.
[14]
Endnotes
With the exception of judgments issued by certain courts located in the Hong Kong Special Administrative Region. See Foreign Judgments Regulations 1992 (Cth), sch 1 item 13.
The contrary view, that it is not necessary to show that fresh facts have been found since the original judgment, but it is sufficient to show that the foreign court was misled into coming to a wrong decision by evidence which was false, has been expressed in Yoon v Song (2000) 158 FLR 295; [2000] NSWSC 1147 with reference to the position in England; see also Nygh at [40.67] - [40.74].
Interpretation of the Supreme People's Court on Several Issues concerning the Applicable Law of Interest Calculation on Debt for the Period Deferred Performance in Enforcement Procedures, Interpretation No. 8 [2014] of the Supreme People's Court issued on 7 July 2014. This rate is approximately 6.4% per annum.
Nor is there any evidence before this Court as to the terms of the Loans.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 19 May 2020
1. The defendants shall pay the plaintiff an amount of RMB 2,802,849.
2. The defendants shall pay the plaintiff's costs, as agreed or assessed, of and incidental to these proceedings.
However, the defendants dispute the amount owing and allege that the plaintiff has not accounted for the following amounts paid to the plaintiff by or on behalf of the defendants, totalling RMB 1,750,000:
1. on or about September 2013, the second defendant repaid the sum of RMB 200,000;
2. on or about November 2013, the second defendant repaid the sum of RMB 1,000,000;
3. on or about March 2014, the plaintiff took possession of the first defendant's vehicle with an estimated market value of RMB 250,000; and
4. on or about late 2013, the plaintiff organised a wedding in the second defendant's facility with the estimated cost of that function to the defendants being RMB 300,000.
(together, "the Alleged Repayments").
The plaintiff asserts that this claim must fail for two reasons.
First, the alleged events referred to in sub-paras (1)-(4) in [19] above occurred before the date of the Final Chinese Judgment, being the judgment the plaintiff seeks to enforce. All of the Alleged Repayments are stated to have occurred at various times from September 2013 until March 2014. The plaintiff commenced proceedings for the recovery of the loaned amounts in April 2014, one month after the last of the Alleged Repayments. The plaintiff submits that these matters are not relevant in that they go to the merits of the underlying dispute and, therefore, they are not reviewable by this Court: Plaintiff's Written Submissions in Reply, [15] - [18].
Second, and in any event, there is no evidence before this Court as to the matters identified by the defendants and, for that reason, they have failed to make out their case that they had partially satisfied the debt which gave rise to the judgment debt under the Final Chinese Judgment.
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].
Subject to certain exceptions (including fraud, as explained below), it is not open to a defendant to challenge the merits of the foreign judgment: Ainslie v Ainslie [1927] HCA 23; (1927) 39 CLR 381 at 402; RDCW Diamonds v Da Gloria [2006] NSWSC 450 at [31]. A plaintiff seeking to enforce a foreign court's judgment can rely on the judgment as creating an estoppel precluding the defendant from raising any defence which was, or could have been, raised in the foreign proceedings: see Carl Zeiss Stiftung v Rayner and Keeler (No 2) [1967] 1 AC 853; RDCW Diamonds v Da Gloria [2006] NSWSC 450 at [28]; XPlore Technologies Corp of America v Tough Corp Pty Ltd [2008] NSWSC 1267 at [16].
There is no dispute between the parties that the defendants here were the defendants in the Chinese proceedings. In any event, they have the same names and dates of birth: see Mallett Affidavit, [25]. Finally, the judgment sum in the Final Chinese Judgment is a specified and fixed amount, being RMB 2,050,000.
I turn now to the issue of the Alleged Repayments. On one view of these matters, the defendants may be taken to submit that the Final Chinese Judgment was obtained by fraud in that the Court was intentionally or recklessly misled into determining the incorrect value of the judgment debt by not being made aware of the Alleged Repayments.
In dealing with this submission, it must be noted that the First Instance Judgment and the Final Chinese Judgment dealt with the factual matters in respect of the Loans and determined whether the Loans were repayable by the defendants. The defendants had the opportunity to contest those matters at first instance and on appeal and the first defendant did contest the First Instance Judgment on appeal. The Alleged Repayments were matters that could have been raised, and ought to have been raised, by the defendants either at first instance or on appeal.
In fact, on appeal to the Chinese Intermediate Appellate Court, the second defendant appears to have raised that he had made a repayment of RMB 200,000 to the plaintiff in respect of the Loans on 18 September 2013: Final Chinese Judgment, pp.5-6. It seems likely that this alleged repayment is the same alleged repayment described above at [19(1)], which is relied upon in the defendants' Points of Defence.
In the Final Chinese Judgment, it appears (at pp.5-7) that the Court "refuse[d] to consider this request [to reduce the judgment debt as a result of the alleged RMB 200,000]" because the second defendant had only formally appealed in respect of an amount of RMB 500,000, by which amount the judgment debt had already been reduced, and thus this claim for an additional reduction of RMB 200,000 "exceeded the scope of the Appellant's claim".
I note, briefly, that no submission was advanced that the approach of the Chinese Appeals Court to rejecting the claim in respect of the repayment of RMB 200,000 amounted to a denial of natural justice, such that this Court would not be minded to enforce that aspect of the judgment. Nevertheless, had such a submission been made, there is no suggestion that the approach denied the defendants the opportunity of presenting their case before an impartial tribunal or that the defendants were otherwise not given due notice. Thus, had such a submission been made, it would have been rejected: see Boele v Norsemeter Holding AS [2002] NSWCA 363 at [24] per Giles JA; Spirits International BV v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2011] FCAFC 69 at [47] per Rares J.
Moreover, the fact that at least one of the Alleged Repayments may have been raised in the Chinese proceedings does not affect the result in the instant proceedings. Either the matter was raised and determined in the foreign proceedings or the matter should have been raised, there being no suggestion that evidence of the Alleged Repayments was not reasonably discoverable at the time of the Chinese proceedings.
The effect of seeking to rely on the Alleged Repayments now is that the defendants impermissibly seek to reopen the merits of the dispute as finally determined by the Appeals Court in the Final Chinese Judgment.
In any event, there is nothing to show that the alleged payments described at [19(1) & 19(2)] above, even if they occurred, related to the Loans the subject of the Final Chinese Judgment. In respect of the wedding services and car, there is nothing to show that the plaintiff agreed to discharge part of the amounts owed under the Loans on this basis (i.e. other than on terms of strict repayment) or that the values of the services and the car were of the amounts claimed. In fact, there is no evidence that the Alleged Repayments occurred, whatsoever.
Further, there is no suggestion that the Alleged Repayments could not be the subject of separate proceedings in China, rather than being used, seemingly as a set-off to the debt in these enforcement proceedings.
Based on the foregoing, the defendants' claim that the Final Chinese Judgment, or part thereof, should not be enforced due to the Alleged Repayments should be rejected and the plaintiff is entitled to enforcement of the judgment amount, less the amount recovered in China.
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.