On 23 May 2018, the plaintiff commenced proceedings against the first defendant in China in the Jinshui District People's Court of China ('the Chinese Court').
In China, following the filing of proceedings, it is the Court that serves the relevant documents on the defendant. In this matter, service was performed by post, initially by service to the address on the first defendant's national identity card and, when that was ineffective, again by post, to the address on the first defendant's household registration (her "Hukou").
The service was ineffective because the first defendant did not live at either address. She had taken permanent residency in Australia in 2014. By way of explanation, a Hukou address is supposed to be the place where a person "habitually resides" and is usually associated with ownership of a property (Ex A2, p 319).
The validity of the service was a significant issue in the case. It is not in dispute that the first defendant was never personally served with the documents and had no notice of the action until well after the court had entered judgment against her.
As the first defendant was not aware of the proceedings she did not respond to the suit. On 28 December 2018, judgment was entered for the plaintiff against the first defendant for the sum of ¥713,596 plus interest (Ex A1, p 248). Subject to exchange rate fluctuations this was about $150,000 plus interest.
The first defendant, not knowing of the judgment, did not pay the plaintiff the judgment sum. Accordingly, on 12 April 2019, the plaintiff applied for an execution process order. Once again, the Chinese Court served the relevant documents on the first defendant by post. Also again, this service did not come to the attention of the first defendant.
In May 2019, the Chinese Court granted the plaintiff an execution order and also suspended the first defendant's China Everbright bank account to the extent of ¥37,538.10. The defendant became aware of this on 1 August 2019.
The Australian proceedings started in the District Court (Parramatta Registry) with the filing of a statement of claim on 3 March 2021. The action was then transferred to the Supreme Court on 22 November 2021. An amended statement of claim was filed on 14 March 2022, leaving the first defendant as the only defendant.
The intent of the amended statement of claim is to enforce the judgment of the Chinese Court in Australia. The Foreign Judgements Act 1991 (Cth) does not apply. The plaintiff therefore relies on the common law to obtain enforcement of the Chinese judgment.
The first defendant, who I will now call the defendant, filed a defence on 7 March 2022. The defence says, inter alia, that the defendant did not know that the plaintiff had sued her in China. She says that she first heard of the proceedings when her bank account was frozen, on 1 August 2019.
The defendant also says that she has not been to China since July 2019, and it would not be practicable for her to attempt to set aside the Chinese judgment. Most importantly, she states that she has been denied procedural fairness because she was never aware of the proceedings in China and has never had the opportunity to defend them.
The plaintiff relied on the following material:
1. her own affidavit filed on 3 February 2023. An earlier affidavit of 2 August 2022 was not relied upon;
2. the affidavit of her solicitor Mr Chang Liu filed on 12 August 2021; and
3. the opinion of a legal expert, Mr Jianming Zhuang, filed on 2 August 2022, and on the expert's affidavit filed on 17 October 2022.
The defendant relied on her own affidavit filed on 31 August 2022 and the report of an expert, Dr Ji Huang, dated 17 October 2022.
The plaintiff and the defendant were both cross examined. I also heard concurrent evidence from the two legal experts.
The parties agreed on the legal principles to be applied in an application of this type. They were described by Rothman J in Bao v Qu; Tian (No 2) [2020] NSWSC 588:
"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."
The defendant emphasised that the onus was on the plaintiff to prove the above four requirements. Ultimately, no issue was taken as to any of the requirements besides the first, the question of jurisdiction.
The defendant referred me to Liu v Ma [2017] VSC 810, where Mukhtar AsJ said, at [6]:
"There is sufficient authority for the view that Australian Courts will enforce a foreign judgment where the defendant is a subject of the foreign country in which the judgment was obtained."
The defendant submitted that the plaintiff had not established that the defendant was a subject of China. The defendant's counsel said that plaintiff's counsel had failed to ask the defendant if she was still a Chinese citizen or if she was a Chinese citizen during the Chinese proceedings (Tcpt, 7 March 2023, p 88 [29]).
The failure to ask the question is of no consequence. In her affidavit of 31 August 2022, at [12], the defendant states:
"I am a Chinese citizen. I hold an Australian permanent residency visa and I can remain in Australia for an unlimited period of time with no restrictions on my travel."
The fact that the defendant has a permanent residency visa implies that she does not hold Australian citizenship, the clear inference being that she has retained her Chinese citizenship.
I do not think there is any substance in the jurisdiction point. The defendant was, and is, a Chinese citizen, she had a Chinese national identity card, she had a Chinese household registration, she had (and still does) have a mobile phone with a Chinese number, she had bank accounts in China and she did business in China.
The case came down to whether there has been a denial of procedural fairness to the defendant, including whether or not notice of the Chinese proceedings had been properly served on the defendant.
In Xu v Wang [2019] VSC 269, at [80], Cameron J listed a denial of natural justice as a basis for the refusal of the orders sought "notwithstanding the satisfaction of the above conditions". At [24], Cameron J referred to the following passage from Boele v Norsemeter Holding AS [2002] NSWCA 363:
"It is a defense to an action on a foreign judgment that the defendant was not afforded natural justice in the foreign proceedings. In Nygh and Davies, Conflict of Laws in Australia, 7th ed (2002) p 194 it is said -
'The requirement of natural justice relates to the procedure of the foreign court. Traditionally it is seen as imposing two requirements: (1) each party must have had the opportunity of presenting his or her case before an impartial tribunal, and (2) each party must have been given due notice of the proceedings.'"
The plaintiff asserted that the question of whether or not there had been valid service under Chinese law was not a relevant consideration for this Court as it amounted to "going behind" the judgment. However, the plaintiff conceded that defective service would be a proper consideration in deciding the requirement of natural justice. This formulation is, I think, consistent with the above quoted passage from Boele.
Put another way, it is not for this court to tell the Chinese Court that it had not complied with service requirements; rather, if service had not been properly effected, that could be an important part of this court's investigation of procedural fairness having been received by the defendant.
Under cross-examination the plaintiff, probably unintentionally, gave two answers against her interest:
1. the plaintiff had no contact with the defendant after a meeting in a Shanghai hotel on 30 January 2018.
2. the plaintiff did not instruct her lawyers to email or otherwise notify the plaintiff of the impending lawsuit. This is to be contrasted with the transcript of the Chinese Court proceedings, which includes the following question by the court and answer by the plaintiff's legal representative:
"Lawyer: plaintiff, did the defendant know when you filed a lawsuit?
Plaintiff: yes, we called and told her we had filed a lawsuit. When we filed the lawsuit, the defendant was still in China." (Ex A2, p 302)
The plaintiff did not attend the hearing, so it must be assumed the lawyers were acting on her instructions. Having regard to the plaintiff's assertion that she had no contact with the defendant after 30 January 2018, together with the accepted fact that the defendant was never aware of the proceedings, it follows that the incorrect answer given to the court was misleading, intentionally or otherwise.
The defendant gave her current occupation as a housewife but said that in 2017 and 2018 she was helping her then partner in his business of providing airline tickets and accommodation to others at, presumably, a discounted rate. As I understood the business arrangement with the plaintiff, the plaintiff was to request tickets and/or accommodation arrangements which would be provided by the defendant (or her partner) and then on-sold to customers of the plaintiff.
As mentioned above, the Chinese Court documents have two addresses for the defendant in the city of Zhengzhou. The plaintiff stated that one of these documents, the national identity card (probably a copy), was provided to her and was used in the court proceedings.
The defendant said the only identity document she had ever shown to the plaintiff was her passport, which did not list her residential address. She suggested that her address in Zhengzhou may have been obtained by illegitimate means.
This direct conflict of evidence is difficult to resolve. One person says an address was given, the other says it was not. I am not prepared to accept the defendant's suggestion that the plaintiff had acted illegitimately in obtaining the address. The expert evidence suggested that there were legitimate means to obtain another person's address. I think it more likely that the plaintiff had the address and provided it to her lawyers, careful not to give the lawyers any information that might have alerted the defendant to the forthcoming proceedings.
When the parties met in the Shanghai hotel on 30 January 2018, the plaintiff made it clear that she sought a refund of monies that she had paid. She did in fact receive about ¥330,000 (about $70,000) in two lots, but on the same day. The defendant's immediate access to this amount of money is arguably another indication of her being subject to Chinese jurisdiction.
However, what is striking to me is that notwithstanding the plaintiff's clear belief that she was owed more money, she never made any demand for payment of the outstanding balance before commencing proceedings.
The plaintiff had the defendant's telephone number and she had her Yahoo email address. Despite this knowledge she had no contact with the defendant after 30 January 2018. I have the clear impression, that armed with the knowledge of the defendant's Zhengzhou address, she proceeded with the intent of securing a judgment having provided the minimum amount of information to her lawyers.
As mentioned above, it is not disputed that the defendant had no knowledge of the proceedings prior to 1 August 2019. This means that the statement of the plaintiff's lawyers to the court, as set out above, to the effect that the defendant had been forewarned of the proceedings, was factually incorrect. The only source of this information could have been the plaintiff as there is no evidence to suggest that the lawyers were other than acting on instructions.
The experts disagreed on the likely reaction by the Chinese Court, had the answer to the above question been: "[n]o, we have not told her about the lawsuit".
The plaintiff's expert did not seem to think the different answer would have made much difference. The defendant's expert said the court would not have proceeded but would have continued to investigate the issue of service, perhaps ending in the need for a public announcement, as per Art 92 of the Civil Procedure Law of the People's Republic of China (Revised in 2017).
Staying with the issue of service, Mr Zhuang (for the plaintiff) said that the rules for service, commencing at Art 85 of the Civil Procedure Law of the People's Republic of China (Ex A2, p 399) needed to be examined in light of the fact that the court, because it was so busy, might proceed immediately to postal service instead of pursuing personal service.
Dr Huang (the defendant's expert) said that her interpretation of the need for further service investigation was supported by Art 1(2) of the Certain Provision so of the Supreme People's Court on the Service of Civil Litigation Documents by Way of Court Express (2004) ('Service of Civil Litigation Documents') which states that postal service is not applicable where "the whereabouts of the receiving person are unknown" (Ex A2, p 576).
I prefer the interpretations of Dr Huang over those of Mr Zhuang because they fit more consistently with the rules which provide for a system of service, starting at Art 85 of the Civil Procedure Law of the People's Republic of China with personal service and then going through different options where personal service is not possible, leading to conditions for postal service and ultimately for a public announcement.
Most importantly, I think that the pre-conditions for postal service were not established because Art 1(2) of the Service of Litigation Documents states that postal service is not available where "the whereabouts of the receiving person are unknown".
In my view, service on the defendant by post was invalid. As discussed above, this finding does not render the decision of the Chinese Court to be invalid, rather it is a powerful factor on the question of whether there has been a denial of natural justice.
Another area of dispute between the experts related to the trigger for the period during which a rehearing could be sought. The judgment says an "appeal petition" can be "put forward" within 15 days (Ex A1, p 248). In this case, the defendant discovered the judgment well after 15 days.
However, Art 205 of the Civil Procedure Law of the People's Republic of China allows for a retrial within six months of the "effective date of a judgment or ruling". Where the basis for the retrial falls within the items listed under Arts 200 (1), (3), (12) or (13), the starting point for the six months is "the day when the party knows or should have known".
Mr Zhuang said that the facts of this case fell within Art 200(1) because discovering there had been litigation (since completed) amounted to new evidence. Dr Huang disagreed, saying that Item (1) only referred to issues concerning the merits of the case. She said this view was reinforced by Item (10) which covered the issue of a person who had not been summonsed.
I think both interpretations are arguable. I note, however, that the defendant's lawyer in China seemed to favour Mr Zhuang's interpretation. In a WeChat exchange with her lawyer in China on 1 August 2019 (the defendant, having just found out about the garnishee order), the lawyer said that the defendant could appeal by way of a "retrial procedure", adding that, "it will be very hard". He went on to say that the legal fees would be "quite a lot" and that an application for a retrial would "not affect the [e]nforcement" (Ex A1, p107).
In a telephone conversation shortly after the WeChat exchange, the lawyer said:
"You have the right to appeal the judgment. However, I do not recommend that you appeal the decision from a practical and commercial perspective. Firstly, you have to be present in China to access the judgment and launch the appeal, which means you have to travel back because you are overseas; secondly, it is not commercially sound for you to appeal, as you no longer have any assets in China, and your only asset, which is a small amount of money, has been garnisheed. You will have to spend quite a lot of money and time to appeal the original decision. I operate in Shanghai and if I were to travel to Henan for your case, it could cost you a lot of money. Lastly, even if you appeal the original decision, there is no way to stop the enforcement proceedings, and you will have to overcome a lot of hurdles before you can stop the enforcement judgment. As such, I would not recommend that you appeal the matter." (Ex A1, p 91).
If the defendant did have a right to seek a retrial on 1 August 2019, her success, as suggested by her lawyer, would have faced difficulties. Against this background, including the expenses associated with the proceedings, it could be seen as reasonable for her to have taken no further action.
Another point made by the defendant was that if a valid defense amounted to new evidence, then that defense would have been known to the plaintiff in December 2018, thus commencing the six months. Therefore, time would have expired by 1 August 2019.
The plaintiff submitted that a failure to exhaust available remedies in China precluded the defendant's right to defend the action in Australia. I was referred to Shamma v Jawad [2022] EWHC 2897 (KB) where Master Dagnall said, at [94]:
"This being the position where there has been an error of substance, it would, in our judgment, be anomalous if our courts were obliged wholly to disregard the existence of a perfectly good remedy under a foreign system of procedure in considering whether the defective operation of that procedure has led to a breach of natural justice. And, indeed, from some of the cases on procedural defects, support can be derived from the proposition that, at least with reference to defects known to the defendant before judgment, the defendant can be required to have made use of any remedy available in the foreign court."
The first point to be made is that there is no basis before me on which I could conclude that the defendant had a "perfectly good remedy". Even if her lawyer's observations on WeChat are accepted, they hardly amount to such a remedy.
The defendant referred me to Adams v Cape Industries Plc [1990] CH 433 at 568:
"It is at least clear that our law does not oblige a defendant who can show that a foreign judgment has been obtained by fraud to have used any available remedy in the foreign court with reference to that fraud if he is successfully to impeach that judgment in our courts…. The position may well be the same in cases where there has been a breach of natural justice of the two primary kinds considered by Atkin LJ in Jacobson v Frachon 138 LT 386,392, namely, absence of notice of the proceedings or failure to afford the defendant an opportunity of substantially presenting his case."
I was also taken to Agbara v Shell Petroleum Development Co of Nigeria Ltd [2019] EWHC 3340 (QB) at [42]:
"It does seem to me that there is a material analogy between a judgment obtained by fraud and one which has been obtained following the other party being unjustly prevented from presenting its case, such that it ought not to be necessary for domestic remedies to be exhausted in the latter situation."
Both the above comments in Adams and in Agbara were obiter dicta. Nevertheless, I think they properly represent the situation here, to the extent that the invalidity of the service, together with the defendant not having had the opportunity to present her case, create a circumstance of such procedural unfairness that any failure to exhaust local remedies can be overcome.
There might be an argument that the court would have proceeded if the correct answer had been given. But that is speculation. It is of some significance that the Chinese Court judgment includes the following:
"The plaintiff Anna ZHOU's interested attorney Xin Cheng appeared in court for the proceedings while the defendant Xiaoli JING, having been served with the summons by this court, refused to appear in court without justified reasons." (Ex A1, p 244).
"Defendant Xiaoli JING did not appear in court, make any defense nor provide any evidence." (Ex A1, p 245)
"This court thought that the defendant Xiaoli JING, having been with a summons by this court served, refused to appear in court without justified reasons, which shall be deemed a waiver of rights to make any defense or cross-examine the evidence, but will not impact on this court making a judgment based on existing evidence and clarified facts by law." (Ex A1, p 245)
I think the above passages from the judgment give a clear indication that the court's perception of the defendant having refused to appear, was a matter of some importance.
The real point, however, is that the defendant has never had the opportunity to present her case, as referred to in Boele. When this point is joined with the defendant not having been validly served with the proceedings, then the case against enforcement in Australia becomes overwhelming.
Accordingly, enforcement of the Chinese judgment in Australia will be refused.
I make the following orders:
1. Judgment for the first defendant.
2. The plaintiff is to pay the first defendant's costs of the proceedings.
3. The parties have leave to apply for any alternate costs order.
[2]
Amendments
14 March 2023 - deleted two lines and added them to line 26.
03 April 2023 - Corrected defendant law firm name from Du Lawyers to Du & Associate Lawyers
14 June 2023 - Changed defense to defence in two places in paragraph 10
15 June 2023 - Case name corrected to contain only surnames
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: 15 June 2023