Enforcement of Foreign Court Orders in Australia: Four Key Requirements – International Courts and Tribunals

International arbitration is often regarded as the preferred option before a domestic court, perhaps primarily because of the relative ease of enforcing awards under the procedures set out in the New York Convention (and given legal force in Australia by the International Arbitration Act 1974 (Cth)).

While the New York Convention process certainly has its advantages, the case Zhengzhou Lvdu Real Estate Group Co Ltd v Shu (2024) NSWSC 58 (Proceedings) reminds us that this is not the only show in town and that, under common law, a foreign judgment creditor must meet only four requirements in order to enforce a judgment of a foreign court. These four requirements, subject to any objections, are not particularly onerous for any creditor according to the court’s decision.

The facts

Plaintiff (Zhengzhou) loaned an amount of 170 million yuan (~AU$37 million) to a Chinese company. The loan was guaranteed by its director, a Chinese resident and defendant in the proceedings (Mrs. Shu). The company defaulted on the loan and Zhengzhou successfully obtained a judgment from the PRC Intermediate Court in Henan Province, China (Chinese court) against the defaulting company and Ms. Shu (Chinese judgment).

Ms Shu owns property in Pyrmont, NSW, so Zhengzhou commenced proceedings in Australia to recognize and enforce the Chinese judgment. Ms. Shu was duly served with court documents in China, yet she did not appear in the Proceedings. Zhengzhou moved to recognize and enforce the Chinese judgment and the Australian court issued orders in the proceedings to recognize and enforce the Chinese judgment.

Reason

China (excluding Hong Kong) is not recognized as a jurisdiction of substantial reciprocity under the Foreign Judgments Act 1991 (Cth) and therefore common law principles apply to determine whether a Chinese judgment can be recognized and enforced.

The four requirements for the enforcement of a common law judgment are well settled and set out in Bao in Qu; Tian (No. 2) (2020) 102 NSWLR 435.

Requirement One – Jurisdiction “in the international sense”

The foreign court must have jurisdiction over the defendant of the type required to ensure that the defendant submits to the jurisdiction of the foreign court. This usually requires that it be personally delivered to the defendant in a foreign case (i.e. a copy of the documents must be handed over to the defendant personally by the carrier, lawyer or other person who is not a party to the proceedings).

Although there was no evidence that Ms. Shu was personally served in the Chinese proceedings, the fact that she appeared and made a statement in the Chinese court meant that she submitted to the jurisdiction of that court. No objection to the jurisdiction of the Chinese court was shown, and so this requirement was met.

Requirement Two – Final and Final

A foreign judgment must be final and final, meaning that it ends the proceedings and suppresses disputes between the parties involved – although it can be appealed.

The Chinese ruling contained words that confirmed that the dispute was over and the proceedings were over. For example, the Chinese judgment ended with “The case has now been heard and closed”. Moreover, it was clear that Zhengzhou could enforce the Chinese judgment, as it had managed to recover around 22 million yuan in China before the proceedings. This requirement was fulfilled.

The third requirement – identity

There must be “identity of parties” – that is, the parties sued in the enforcement proceedings must be parties to the foreign proceedings. The identity of the parties in enforcement and foreign proceedings must be proven by evidence – it is not enough that the name of the person is identical.

This requirement was met in the proceedings. Lawyers from China who were in contact with Ms Shu in the Chinese proceedings presented evidence that proved they were the same person. Further evidence of correspondence with Ms Shu discussing the Chinese judgment and trial was provided, further confirming her identity.

Requirement Four – Fixed Liquidation Amount

The foreign judgment must be for a fixed settlement amount. This requirement was also fulfilled in the Proceedings. The Chinese judgment was for the amount of the loan plus interest and costs. It was a fixed amount. While interest was rising according to a fixed pattern, this did not mean that the Chinese judgment was not for the liquidation amount.

Any reason for the challenge?

Ms. Shu could challenge the recognition and enforcement of the Chinese judgment by relying on one of the following grounds set out in Tianjin Yingtong Materials Co Ltd v Young(2022) NSWSC 943:

  • that enforcement would be contrary to Australian public policy. For example, because the judgment was obtained by intimidation or coercion of the defendant (coercion), or by undue influence

  • that the Chinese judgment was obtained by fraud on the part of Zhengzhou or the court

  • that the Chinese judgment is a criminal or debt (tax) debt

  • that enforcement of the Chinese judgment would be a denial of natural justice.

Ms Shu did not appear so none of the defenses were argued. Even after applying its own assessment, the Court did not find that any of these grounds were satisfied. As to grounds one, two, and four, the court found that they were not made out because the trial record regarding the Chinese judgment showed that Ms. Shu participated in the Chinese proceedings, argued and led evidence, but did not make any complaints regarding the process or conduct of Zhengzhou .

Regarding ground three, the court held that Ms. Shu could argue that two sets of interest accrued (under the Chinese judgment, Zhengzhou was entitled to recover interest under the loan agreement and post-judgment interest – a practice known as “double interest”), which meant that the sentence was criminal in nature. Since there was no evidence or pleadings on this point (as Ms. Shu did not appear), the court ruled that Ms. Shu’s burden of proof was not met.

As a result, judgment was ordered in favor of Zhengzhou in recognition of the Chinese judgment.

Key with you

While international arbitral awards are often regarded as easily recognizable and enforceable, the judgment in this case shows that foreign court judgments can similarly be relatively easily enforced at common law if they meet the four requirements described above. However, this is also subject to issues such as the service of Australian proceedings on a foreigner resident in a foreign country – although that was not the case in this particular case.

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This publication does not address every important topic or change in the law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s particular circumstances. If you are interested in this publication and would like to know more or would like to obtain legal advice regarding your situation, please contact one of the individuals listed.

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