Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 6)

Catchwords: PRIVATE INTERNATIONAL LAW – orders with extraterritorial effect – where judgment stayed pending the PRC Court’s consideration of the cross-defendant’s application to dissolve Civil Ruling of Court in PRC that restrains it from complying with the judgment – where communications of the PRC Court show its awareness of this Court’s decision – where PRC Court has stated intention to make decision before 30 June 2025 – whether stay in this Court should be lifted

Cases Cited: Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 5) [2024] NSWSC 1287
Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 2) [2023] NSWSC 1405

Category: Consequential orders

Parties: Shinetec (Australia) Pty Ltd (Plaintiff)
The Gosford Pty Ltd (First Defendant/Cross-Claimant/Applicant)
David Anthony Hurst (Second Defendant/Applicant)
David Anthony Sampson (Third Defendant/Applicant)
Bank of China, Sydney (Fourth Defendant/Cross-Defendant/Respondent)
Macquarie Bank Limited (Fifth Defendant)

Representation: Counsel:
F Assaf SC / A Berriman (Plaintiff)
P S Braham SC / D Farinha (First Defendant/Cross-Claimant, Second and Third Defendants/Applicants)
J B Kay Hoyle SC / C Ernst (Fourth Defendant/Cross-Defendant/Respondent)
Solicitors:
Pinsent Masons (Plaintiff)
Johnson Winter Slattery (First Defendant/Cross-Claimant, Second and Third Defendants/Applicants)
King & Wood Mallesons (Australia) (Fourth Defendant/Cross-Defendant/Respondent)

File Number(s): 2021/220732

EX TEMPORE JUDGMENT (REVISED)

1. The background to this matter is set out in my judgment of 15 October 2024. [1] I shall use the same abbreviations here.

2. I then declined to lift my 14 December 2023 stay of my 20 November 2023 $37 million judgment in favour of Gosford against the Bank. [2]

3. I did so pending consideration by the Chinese Court of the Bank’s application to that Court to dissolve its Civil Ruling that currently restrains the Bank from making payment under the Letter of Credit that is the subject of my 20 November 2023 judgment.

4. I took this course for reasons of comity between this Court and the Chinese Court as, on 15 October 2024, the position was that the Chinese Court was scheduled to hear the Bank’s application on 26 December 2024.

5. I said:

“Notwithstanding the undoubted importance of letters of credit in international trade, comity requires, in the particular circumstances of this case, that I await the Chinese Court’s decision, provided that it is made within a reasonable time of the hearing scheduled for 26 December 2024.” [3]

6. The purpose of my continuation of the stay was to enable the Chinese Court to consider whether, in the light of my conclusions as to the enforceability of the Letter of Credit, which conclusions have now been upheld on appeal, it should dissolve the Civil Ruling, thus enabling the Bank to comply with the judgment that this Court has entered against it.

7. Gosford now makes a further application to lift the stay on my 20 November 2023 judgment.

8. There have been a number of developments since my last consideration of the matter.

9. In December 2024, the Bank made comprehensive written submissions to the Chinese Court, including:

“The Australian court has already rendered a judgment on the dispute under the standby letter of credit involved in this case, and [Shanxi] seeking relief based on the same facts domestically falls under the principle of ‘res judicata’. Therefore, your honourable court should not continue to hear this case but should directly dismiss the plaintiff’s case.

…

Since the Australian court has issued a binding judgment affirming that Gosford is entitled to claim under the standby letter of credit, and [Shanxi], as a party in that proceeding, has voluntarily accepted and is bound by the jurisdiction of the Australian court, the judgment of the Australian court must be executed and honoured. Therefore, your honourable court lacks jurisdiction over the facts established by the effective judgment of the Australian court (i.e., the fact that Gosford is entitled to claim under the standby letter of credit.”

10. In effect, the Bank argued that by reason of this Court’s determination of the question of the Bank’s obligation under the Letter of Credit, the Chinese Court should summarily dismiss Shanxi’s challenge to it.

The 26 December 2024 and 21 January 2025 hearings

11. The “public hearing” foreshadowed in the Chinese Court’s Announcement of 20 September 2024, set out at [24] of my 15 October 2024 judgment, took place on 26 December 2024.

12. It appears that there was also a further “hearing” on 21 January 2025.

13. A notice published by the Chinese Court of 7 February 2025 appears to describe what happened on 26 December 2024 and perhaps also on 21 January 2025.

14. That notice stated:

“The Court has held a public trial on 26 December 2024 and organised a hearing on 21 January 2025, during which the [Shanxi] and the third party BOC Shanxi conducted factual statements, Evidence-in-chief, cross-examination and court debates around the following issues: 1) the nature of the Plaintiff’s claim and the application of law; 2) jurisdiction; 3) issues relating to the standing of the Plaintiff and the Defendant; 4) the relationship between the litigations in New South Wales and in Taiyuan; 5) whether the demand made by the Defendant, Gosford, constitutes fraud.”

15. The notice thus described five “issues” evidently debated on 26 December 2024 and perhaps also on 21 January 2025. Those issues included “jurisdiction” [4] and “the relationship between the litigations in NSW and in Taiyuan”. [5] The latter appears to be the subject of the Bank’s submissions in support of summary dismissal of Shanxi’s claim on the basis of this Court’s decisions.

16. The 7 February 2025 notice continued:

“The Court has found that, as a foreign-related civil and commercial case, the nature of this case is an independent guarantee fraud dispute, the applicable law shall be Chinese law, and specifically the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Independent Guarantee Dispute Cases (“PRC Independent Guarantee Provisions”); as the court at the domicile of BOC Shanxi, the independent guarantee issuer, this Court has jurisdiction over the case; and [Shanxi] and the Defendant Gosford both have the capacity to sue and to be sued in this case.”

17. That paragraph records what the Chinese Court found arising from the 26 December 2024 and 21 January 2025 hearings. The finding appears to be that the Chinese Court determined it had jurisdiction over the matter before it; the “jurisdiction” issue referred to in the passage I have set out above.

The 25 February hearing

18. An earlier notice from the Chinese Court, dated 26 January 2025, stated that:

“The Court is scheduled to hear from the parties again on 25 February 2025, to continue to investigate some of the facts, and is scheduled to make a decision over this case by 31 March 2025.”

19. The 7 February 2025 notice also stated that the Chinese Court proposed to “hold another trial to hear from the parties on 25 February 2025.”

20. The notice set out eight “questions” on which the 25 February 2025 hearing “will be focussing”. Those questions all appear to be related to the fifth “issue” ventilated at the 26 December 2024 and 21 January 2025 hearings: “whether the demand made by the Defendant, Gosford, constitutes fraud”.

21. As I have set out in my earlier judgments, that was an issue eschewed in terms by Shinetec in the proceedings before me.

22. The notice stated:

“The parties will present their opinions on whether Gosford’s demand constitutes independent guarantee fraud.”

23. Mr Braham SC, who appeared with Mr Farinha for Gosford, submitted that these matters show that the Chinese Court had by 7 February 2025 determined not to accede to the Bank’s submission that the Chinese Court summarily dismiss Shanxi’s proceedings on the basis agitated in its submissions; and had thus resolved the “relationship between the litigations” issue adversely to the Bank. Mr Braham submitted that the documents showed that the Chinese Court had now turned to deal with the substantive question of whether the Letter of Credit was procured by Gosford’s fraud; a matter not relevant to the basis on which I stayed the judgment.

24. I am not able to draw that conclusion from the 7 February 2025 notice. This may be the position that the Chinese Court had by then reached. But the conclusion is equally open, on the material before me, that the Chinese Court had, in effect, reserved its decision on the “relationship between the litigations” issue but, not being satisfied about the “fraud” issue, had directed its attention to that issue and was, in effect, inviting further submissions.

25. As to what occurred on 25 February 2025, a further notice was issued by the Chinese Court on 25 March 2025, which said,

“The Court convened for a scheduled hearing on 25 February 2025, but the Defendant Gosford failed to appear without providing an explanation or submitting any written opinion.

The absence of the Defendant Gosford from the litigation proceeding has increased the difficulty for us to examine the facts related to potential fraud. Some facts still require clarification, and our Court needs additional time to further investigate. The original plan to “make a decision over this case by 31 March 2025” will be postponed to before 30 June 2025.”

Should the stay be continued?

26. The Chinese Court’s communications show that it is aware of the 14 December 2023 stay and of this Court’s interest in the progress of the proceedings in the Chinese Court.

27. Thus, in its 26 January 2025 notice the Chinese Court said:

“The Court notes that the Equity Division of the Supreme Court of New South Wales in Australia is concerned about the progress of the litigation case in the Chinese courts, and would be grateful if your branch could discuss with the Bank of China Limited and report to Justice Stevenson of the Equity Division of the Supreme Court of New South Wales in Australia by 7 February 2025 on the aforesaid judicial arrangements of this Court.”

28. Similarly, in its 25 March 2025 notice the Chinese Court said:

“Considering that the Equity Division of the Supreme Court of New South Wales in Australia is concerned about the progress of the litigation case in the Chinese courts, we ask [Shanxi] to please forward the aforesaid judicial arrangements of this Court to Justice Stevenson of the Equity Division of the Supreme Court of New South Wales through Shinetec or its lawyers, as well as to the Defendant Gosford.”

29. I infer from these communications that the Chinese Court is mindful of the comity considerations for both that Court and this Court that have led me to stay my judgment of 20 November 2023.

30. The Chinese Court has now stated that it will make a decision “before” 30 June 2025.

31. Were I to lift the stay now, it would foreclose the possibility that the Chinese Court may lift its suspension of the Civil Ruling that currently restrains the Bank from making payment under the Letter of Credit; and thus permit the orderly resolution of the current impasse.

32. I infer from the Chinese Court’s 25 March 2025 statement that, notwithstanding its need to further investigate, it will make a decision “before” 30 June 2025, that it considers that to be a reasonable time within which to come to a decision.

33. In those circumstances, I have concluded that the appropriate course is to continue the stay but only until 30 June 2025, or such earlier date on which the Chinese Court makes its decision.

34. Whatever the Chinese Court’s decision is, I can see no justification for staying my judgment beyond that time.

35. If the Chinese Court’s decision is to dissolve the Civil Ruling, the Bank will doubtless make payment under the Letter of Credit.

36. If the Chinese Court decides not to dissolve the Civil Ruling and, in effect, decides finally to restrain the Bank from making payment under the Letter of Credit, the Bank will have to decide how it can resolve the competing commands of this Court and the Chinese Court.

37. I make the following orders:

38. The stay on my judgment of 20 November 2023 continue until 30 June 2025 or the date on which the Taiyuan Intermediate People’s Court of Shanxi Province makes its decision in proceedings (2021) Jin 01 Min Chu No 809-4, whichever is earlier, and that the stay be thereupon lifted;

39. Grant liberty to apply on short notice to restore the matter should the Chinese Court’s decision come to hand prior to 30 June 2025;

40. Stand the first defendant’s notice of motion of 3 September 2024 over for directions to 4 July 2025;

41. Invite the parties to confer and agree on a timetable for written submissions as to the costs of that notice of motion.

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Endnotes

Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 5) [2024] NSWSC 1287.

Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 2) [2023] NSWSC 1405.

At [48].

Issue 2.

Issue 3.