Plaintiff v First Defendant

1. By originating motion dated 6 November 2024, the plaintiff, Mr Gongwei Fu, seeks an order recognising a civil judgment of the Qingxiu District People's Court of Nanning City, Guangxi Zhuang Autonomous Region, China, dated 30 June 2023, in the sum of RMB17,597,932.66 together with interest.
2. That judgment was the subject of a second instance proceeding in the Nanning Intermediate People's Court, where it was sought to be overturned by the defendants in this proceeding. The application for overturning was rejected and the judgment upheld.
3. There was a further application for a retrial made on 8 November 2024. On 21 July 2025 that retrial application was rejected by the Guangxi High People's Court.
4. Ms Li, who is the second defendant in this proceeding, has taken an active role in these proceedings.
5. In her outline of submissions, Ms Li says that for a foreign judgment to be recognised at common law, four conditions must be satisfied:

(a) the foreign court must have exercised jurisdiction that Australian courts will recognise;

(b) the foreign judgment must be final and conclusive;

(c) there must be an identity of the parties; and

(d) the judgment must be for a fixed sum or debt.

1. That proposition is not in contest and is well-established by the authorities.
2. Significantly, Ms Li does not contend that these criteria have not been met in the present case. I am satisfied the conditions have been met.
3. Ms Li, however, submits that one aspect of the Chinese judgment relating to interest, is not recoverable because it falls within an exception to the general principle, that exception being that Australian courts will not enforce a penal law directly at the suit of a foreign government or indirectly, in a suit between private citizens. Ms Li says that a particular interest provision imposed by the Chinese court is penal and should not be enforced.
4. In relation to the first defendant, Mr Kaiyong Pang, the picture is somewhat different. Mr Pang has not entered an appearance but that is in circumstances where he has not been served. Mr Fu seeks an order confirming informal service on 17 July 2025 and then seeks judgment in default of appearance under Rules 45.03(1) and 80.11(2) of the Supreme Court (General Civil Procedure) Rules 2025 (Vic).
5. It is convenient, first, to deal with Ms Li's contention regarding a portion of interest on the judgment sum.
6. There are three components of interest on the judgment debt:
   1. 21.6 per cent per annum from 9 April 2019 to 19 August 2020;
   2. 14.8 per cent per annum from 20 August 2020 until the judgment sum is paid; and
   3. in addition to the interest in (2) above, a further 6.3875 per cent from 5 April 2024 until the judgment debt is paid, this component, being described as double part interest.

It is this last amount of the interest component, the double part interest, which is in contest.

1. In relation to the double part interest, both parties relied on aspects of an expert report filed on behalf of Mr Fu. That report, filed 15 August 2025, provides the opinion of Professor Andrew Godwin from the University of Melbourne Law School as to various matters of Chinese law. The relevant portions of that report are as follows:

1. Article 260 of the Civil Procedure Law provides for the payment of interest in circumstances where a judgment debtor fails to pay the judgment debt within the period as specified in a judgment as follows:

If the person subject to enforcement fails to perform the obligation to pay money within the period specified in the judgment, ruling and other legal document, [the person] shall pay double the debt interest for the period of delayed performance. If the person subject to enforcement fails to perform other obligations within the period specified in the judgment, ruling and other legal document, [the person] shall pay an amount for delayed performance.

2. The method for calculating the 'debt interest' as referred to in Article 260 of the Civil Procedure Law is governed by the 'Interpretation of the Supreme People's Court on Several Issues Concerning the Applicable Law for Calculating Debt Interest During the Delayed Performance Period in Enforcement Procedure' (the 'SPC Interpretation').

3. The SPC Interpretation is expressed to be 'formulated in order to standardise the calculation of debt interest during the period of delayed performance in the execution procedure, in accordance with the provisions of the Civil Procedure Law and in combination with judicial practice'.

4. Article 1 of the SPC Interpretation refers to Article 253 of the Civil Procedure Law and distinguishes between 'general debt interest' [一般债务利息] and the 'double part debt interest' [加倍部分债务利息]. It states the rule (the 'Double Interest Rule') that the debt interest during the period of delayed performance consists of the 'general debt interest' and the 'double part debt interest'. Article 1 provides as follows:

After the double calculation in accordance with Article 253 of the Civil Procedure Law, the debt interest during the period of delayed performance includes the general debt interest during the period of delayed performance and the double part debt interest.

...

6. In relation to the calculation of the 'double part debt interest', Article 1 of the SPC Interpretation provides as follows:

The calculation method of the double part debt interest is [as follows]:

double part debt interest = the monetary debt as determined by the effective legal document(s), other than the general debt interest, that the debtor has not yet paid × 1.75 per ten thousand per day × the period of delayed performance.

1. The upshot of Professor Godwin's analysis is that the Chinese law provides that the double part interest rate is 6.3875 per cent per annum payable on the sum of RMB17,597,932.66 from 5 April 2024.
2. In written submissions, Ms Li says that the double part interest constitutes a penalty within the understanding of that expression as determined by the High Court in Andrews v Australia and New Zealand Banking Group Limited [2012] HCA 30; (2012) 247 CLR 205 ('Andrews v ANZ') at [10]:

[10] In general terms, a stipulation prima facie imposes a penalty on a party ("the first party") if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.

1. Ms Li, in her written submissions, contends, in effect, that the award of the double part interest constitutes a collateral stipulation to the primary stipulation that the judgment debt should be paid, and that, as a result, it is in the nature of security for and in terrorem of the satisfaction of the requirement to pay the judgment.
2. In this regard, she contends that the payment of the general debt interest constitutes compensation for the non-payment of the judgment sum, and so the double part interest is a penalty.
3. I am satisfied that this is not the sense in which the word 'penal' is used in the relevant jurisprudence regarding recognition of foreign judgments.
4. In Doe v Howard [2015] VSC 75, J Forrest J reviewed authorities in this country, and in the United Kingdom, regarding the notion of a penal judgment, and says:

[142] As will become apparent in a moment, a central issue on this point is what type of foreign proceeding is 'penal'. To put the proposition in context - is the rule against enforcement of a foreign penal law confined to actions in which the state is a party, or does it extend to civil suits (such as this) between individuals in a foreign court in which a private right is sought to be enforced? Lord Watson in Huntington noted that the phrase 'penal action' did not provide an accurate definition, and said as follows:

In its ordinary acceptation, the word 'penal' may embrace penalties for infractions of general law which do not constitute offences against the State; it may for many legal purposes be applied with perfect propriety to penalties created by contract; and it therefore, when taken by itself, fails to mark that distinction between civil rights and criminal wrongs which is the very essence of the international rule... But the expressions 'penal' and 'penalty', when employed without any qualification, express or implied, are calculated to mislead, because they are capable of being construed so as to extend the rule to all proceedings for the recovery of penalties, whether exigible by the State in the interest of the community, or by private persons in their own interest.

[143] In SA Consortium General Textiles v Sun and Sand Agencies Ltd, Lord Denning MR considered whether punitive or exemplary damages constituted a penal sanction. At issue were the provisions of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (UK) and their possible application to a judgment of a French court said to be 'in respect of a fine or other penalty' or 'contrary to public policy' in England (being expressions used in that Act). His Lordship, in obiter dicta, said:

... The word 'penalty' in the statute means, I think, a sum payable to the state by way of punishment and not a sum payable to a private individual, even though it is payable by way of exemplary damages.

...

[144] To similar effect, in Nygh's Conflict of Laws in Australia the authors state:

However, the mere fact that a penalty has been imposed by a foreign state to discourage what is socially undesirable conduct is not enough. In order to render the imposition penal the penalties must be recoverable 'at the instance of the State or of an official on its behalf, or of a member of the public in the character of a common informer'.

...

[146] These principles, it seems to me, hold good in this country - in particular, in determining whether the right asserted by Jane Doe is, in truth, penal in nature.

1. In those circumstances, I am satisfied that what is plain is that a penalty in the Andrews v ANZ sense will not necessarily give rise to a penal judgment which will not be recognised under Australian law.
2. In Doe v Howard, his Honour sets out the general principles:

[157] In the result, I think these authorities stand for the following:

(a) There is no rule that an award of punitive damages constitutes a penal sanction.

(b) Critical to the characterisation of the alleged penalty is the nature of the right and the purpose of the legislation (if applicable) which provides that right.

(c) A penal sanction will generally arise out of the enforcement of a public, not private, right.

(d) A sum payable to the State by way of punishment is a penalty. A sum payable to a private individual arising out of a private right where the award is one for punitive damages is not a penal sanction.

1. In oral submissions, senior counsel for Ms Li sought to distinguish Doe v Howard and rested heavily on the judgment of Bergen J in Schnabel v Lui [2002] NSWSC 15 ('Schnabel'). In that judgment her Honour said:

[176] Judge Pregerson 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 [86]). Although the plaintiffs were placed in a situation of detriment by the failure of the first defendant to comply with the Court's orders, the damages were not compensation for the detriment. The damages were to punish or penalise the first defendant and even though the damages were payable to the opposing party, as in Jones v Jones and A_bingdon Rural District Council v O'Gorman_, as opposed to the State, I am of the view that the purpose of the award of the damages was to punish the first defendant and was a sanction. Multiple damages were the "penal consequence" for the first defendant's failure to comply with the Court's orders.

[177] Punishment for the failure to comply with the US Court's order in my view does fall within the categories of either a penal law or other public law of the foreign jurisdiction and is unenforceable by this Court. The first defendant submitted that the whole of the judgment is unenforceable in those circumstances...

1. Schnabel stands somewhat on its own in the authorities. It was distinguished in Benefits Strategies Group Inc v Prider (2005) 91 SASR 554, a decision of the Full Court of the South Australian Supreme Court where Bleby J said:

[72] I do not pass on the correctness of that decision. If correct, it is distinguishable on the footing that it was a penal award, having an obvious "public" connotation, for failing to comply with an order of the United States court. I have already set out the circumstances in which the penal damages came to be claimed in this case. They were claimed and awarded on the same basis on which this Court might occasionally exercise its jurisdiction to award punitive or exemplary damages.

1. In Doe v Howard, J Forrest J also distinguished the decision in Schnabel. His Honour says:

[169] In summary, her Honour reasoned that the sole purpose of the award of punitive damages in the U.S court was to punish the defendant. With respect, for reasons I have set out, I think this analysis may overlook the nature of the underlying right sought to be exercised by the plaintiff.

...

[179] In my view, and consistent with these authorities, an award of punitive damages in a civil suit between individuals does not constitute a penal order.

1. In Suzhou Haishun Investment Management Co Ltd v Zhao [2019] VSC 110 ('Suzhou Haishan') Cameron J also dealt with Schnabel in these terms:

[99] Against this should be balanced the decision of Bergin J in Schnabel v Yung Lui, in which her Honour declined to enforce an award of punitive damages by a United States court on the basis that the award was intended to 'penalise the first defendant and to deter others from failing to comply with the court's orders'. As such, the award was imposed for public purposes.

[100] In Benefit Strategies Group, Bleby J distinguished the decision of Bergin J in Schnabel on the basis that the award in the latter case had a 'public connotation', being based on the defendant's failure to comply with an order of a United States court, rather than in vindication of the plaintiff's rights. The distinction is a cogent one. However, with respect to Bleby J, it may be difficult in practice to ascertain the purpose behind remedies ordered in foreign judgments, especially where the reasons given by the foreign court are terse.

1. In her written submissions, Ms Li notes three cases in which double interest was found not to be penal in the relevant sense. They are Bao v Qu; Tian (No 2) [2020] NSWSC 588; (2020) 102 NSWLR 435 ('Bao'); Zhengzhou Lvdu Real Estate Group Co Ltd v Shu [2024] NSWSC 58 ('Zhengzhou'); and Suzhou Haishan to which I have already referred.
2. Ms Li's contention is that because in Bao and Zhengzhou, no submissions or evidence were advanced on the part of the defendant that such interest was penal in nature and that as, in this respect, it was the defendant who bore the onus of establishing a reason not to enforce the judgment, those decisions do not advance matters in terms of the characterisation of the interest with which I am concerned. I accept that that is an appropriate characterisation of that aspect of those two judgments.
3. Ms Li, in her written submissions, acknowledges that in Suzhou Haishan, Cameron J specifically held that the interest component of a Chinese judgment was not penal in nature. The relevant passage from her judgment is at paragraph [114(8)] and reads as follows:

In her defence to the further amended statement of claim, Ms Zhao alleged that the judgments in the Chinese proceedings were penal. The basis of this allegation was that the judgment in the Chinese proceeding dated 16 October 2015 provided, inter alia, that Ms Zhao was to pay a penalty interest rate of 'quadruple [the] benchmark interest rate released by the People's Bank of China for loans of the same type at the same period'.

The judgment also provides that, according to the Civil Procedure Law of the People's Republic of China art 253, judgment debtors who fail to repay judgment creditors within the time provided for by the court are liable to pay double interest.

...

Having received further submissions on this issue from the parties and considering the interest rates imposed, and given Suzhou Haishan's submissions that interest will not be sought on interest, I do not consider that the interest awarded is penal in nature by the standards of this Court.

1. Ms Li contends that this judgment did not separately consider the double interest component of the interest payable and whether that component was enforceable. In Suzhou Haishan, Cameron J refers to relevant authority regarding the characterisation of a penal judgment for the purposes of recognition and considers the total interest payable in that context. In the passage I have referred to, her Honour specifically refers to the double interest component under article 253 and specifically concludes that the whole of the interest amount is not penal. Contrary to the submissions of Ms Li, it seems to me that Suzhou Haishan stands squarely for the proposition that double part interest is not penal.
2. In that regard, Suzhou Haishan is an application of the general principles established by J Forrest J in Doe v Howard. In this context, with appropriate adaptation for the fact that I am concerned with an extra payment of interest rather than exemplary damages, I am satisfied that the reasoning of his Honour applies and that the double part interest does not constitute a penal judgment within the meaning of that term for the purposes of recognition of a foreign judgment.
3. Here, there is no public interest element. The double part interest arises out of the exercise of a private right and it has no connection with the state, nor is the plaintiff here acting as a common informer. There is no basis on which it can be concluded that the payment of the extra interest component is imposed for public purposes to punish the defendant for non-compliance with the judgment, rather than being an additional compensation for the plaintiff for the detriment of being kept out of the judgment sum.
4. In all of the circumstances, I am satisfied for the reasons I have indicated, that the double part interest is not penal in the relevant sense.
5. I turn now to the application for confirmation of informal service and summary judgment against the first defendant.
6. The solicitors for Mr Fu have taken the following steps to serve Mr Pang. On 15 November 2024 documents relating to the freezing order made on 14 November 2024, including the originating motion, were sent by post and email together with a cloud link, to the lawyers who had acted for Mr Pang in the Chinese proceeding. Also on that day, the lawyers for Mr Fu sent Mr Pang a text message to what they understood to be his mobile phone number, advising that documents had been sent to the Chinese lawyers and Mr Fu sent Mr Pang a WeChat message.
7. On 9 December 2024 Mr Fu's lawyers took steps to serve Mr Pang under the Hague Convention. On 12 December 2024, the Foreign Service Office of the Supreme Court sent materials to the relevant Chinese authority.
8. After various follow up contacts with the Foreign Service Office, on 20 May 2025 Mr Fu's lawyers received from the International Legal Corporation Centre, Ministry of Justice in China, a delivery receipt from the People's Court of Qingxiu District, Nanning City, and a certificate of receipt, a Hague Convention form. Those documents demonstrate that, from the perspective of the Chinese authorities, all possible means have been exhausted to serve Mr Pang, but service has not been able to be effected.
9. On 9 July 2025 the solicitors for Mr Fu sent a further set of materials in relation to this matter, comprising orders, affidavits, submissions and a Form 7AAA by pre-paid post and by email with a link. On 10 July 2025 the solicitors sent a text message to the number they believed to be Mr Pang's advising that documents had been sent to the Chinese lawyers. Also on that day, Mr Fu sought to send a WeChat message to Mr Pang, but he received a message that his message had been blocked.
10. One further matter of significance should be noted. In an affidavit filed on 9 December 2024, Ms Li stated that she was in a relationship with Mr Pang, although they had never married and she alleged had not lived together.
11. On the basis of all of these matters, I am satisfied that it is likely that Mr Pang is aware of the proceedings and I am prepared to grant an order confirming the informal service, effective as at 17 July 2025.
12. On the basis of the evidence, I am satisfied that the terms of Rule 80.11(2) has been satisfied and that it is appropriate to enter a default judgment. I am satisfied that there having been no appearance by Mr Pang, it is appropriate to proceed to judgment in default of appearance.
13. For the reasons I have outlined in relation to Ms Li, I am satisfied that the judgment of the Chinese Court should be recognised in full.
14. That leaves two questions. First, the conversion of the settlement to Australian dollars and the amount; and second, whether there should be a stay of any order I make.
15. I am satisfied that it is appropriate to enter judgment for Mr Fu in Australian Dollars: see INGENU CRO Pty Ltd v Psycheceutical AU Pty Ltd (in liquidation) [2025] VSC 581 at [92] and [93]. I am satisfied that when the relevant amounts are converted to Australian Dollars, the judgment sum will be $3,709,591.83 together with interest of $3,242,789.48.
16. Finally, Ms Li asked for a stay of my orders for 28 days so that she can make an application for an instalment under the Judgment Debt Recovery Act 1984 (Vic). In submissions on this point, her senior counsel accepted that there was likely to be no practical way in which any enforcement of any order I make could result in the sale of her Australian property within 28 days. In those circumstances, in my view, there is no need for a stay and I decline to order it.