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A Chinese Judgment Denied Enforcement in Australia, As "Public Announcement" against Natural Justice?

Wed, 26 Jun 2024
Categories: Insights
Contributors: Meng Yu 余萌
Editor: C. J. Observer

Key takeaways:

  • In June 2023, the Supreme Court of Victoria, Court of Appeal, Australia, set aside a summary judgment for the enforcement of a Chinese monetary judgment on the ground that the judgment debtor had been denied natural justice (Yin v Wu [2023] VSCA 130).
  • The case provides a perspective on how Australian courts assess whether substituted service by public announcement in Chinese courts meets natural justice standards.
  • The recently amended Chinese Civil Procedure Law introduces more flexible methods for cross-border service of process to ensure procedural fairness and efficiency.

On 1 June 2023, the Supreme Court of Victoria, Court of Appeal, Australia (hereinafter “Victoria Supreme Court of Appeal”) set aside a summary judgment for the enforcement of a Chinese monetary judgment on the ground that the judgment debtor had been denied natural justice (Yin v Wu [2023] VSCA 130). The Chinese judgment was made by the Primary People’s Court of Yinzhou District, Ningbo, Zhejiang Province (hereinafter “Ningbo Primary Court”) in 2018.

This is by far the second reported case of a Chinese monetary judgment being refused enforcement in Australia, according to the CJO database. The first of its kind was Xu v Wang [2019] VSC 269, where the Chinese judgment, which coincidentally also came from a local court in Ningbo (Ningbo Intermediate People's Court), was denied enforcement by the Supreme Court of Victoria on a similar ground of “abuse of process”.

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It is interesting to see how the Australian courts assess whether certain proceedings of a foreign court are contrary to natural justice. In the case discussed in this post, it is the 'public announcement' as a substituted service ordered by a local Chinese court that is under scrutiny by the Australian judges.

In addition to presenting the differing views from two divisions of the Supreme Court of Victoria (the Trial Division and the Court of Appeal) in this case, this post will also discuss what is expected of "modern courts" in serving foreign defendants in this context.

I. Case Background

It is a dispute arising from a foreign exchange agreement between the Plaintiff (judgment creditor), Mr. Di Wu, a Chinese national living in China, and the Defendant (judgment debtor), Mr. Ke Yin, a Chinese national living in Australia.

On 13 October 2017, Wu commenced civil proceedings against Yin in the Ningbo Primary Court. On 1 November 2018, Wu obtained a default judgment against Yin in the Ningbo Primary Court for the sum of CNY 3,510,015. But Yin has refused or failed to pay that sum.

On 19 May 2020, Wu issued proceedings in the Supreme Court of Victoria in which he sought to enforce the Chinese judgment against Yin (“enforcement claim”). Alternatively, Wu claimed a breach of the foreign exchange agreement and sought reimbursement of the monies paid (“restitution claim”). Yin defended those proceedings on numerous grounds, including that he did not know Wu, and that he was not previously aware of the proceedings brought against him in China.

On 22 October 2021, a summary judgment was entered in favor of Wu by an Associate Justice of the Supreme Court of Victoria. The Associate Justice determined that Yin’s defense to the Chinese judgment enforcement claim did not have a real prospect of success and nor did his defense to the restitution claim. Therefore, the Associate Justice gave judgment against Yin on the enforcement claim for the Australian dollar equivalent of the Chinese judgment sum. Yin appealed to a judge of the Trial Division. That appeal was dismissed (see Wu v Yin [2022] VSC 729).

Yin then appealed to the Victoria Supreme Court of Appeal. On 1 June 2023, this Court allowed the appeal on one ground of appeal (as discussed below), with the result that the summary judgment for the Chinese judgment sum would be set aside, and refused leave to appeal on all the other grounds and, at the same time, granted summary judgment to Wu for the amount of the restitution claim, together with interest.

In other words, the judgment creditor won the case. Despite the fact that the Chinese judgment was not enforced, Wu’s alternative, i.e. the restitution claim, was granted by the Australian court.

II. Court Views

2.1 Assessment under the Australian Common Law

As China is not a designated country under the relevant REFJ regulations such as the Foreign Judgments Act 1991 (Cth) and the Foreign Judgments Regulations 1992 (Cth), the applications for recognition and enforcement of Chinese judgments are reviewed under Australia’s common law principles.

Four conditions must be satisfied for a foreign judgment to be recognized at common law, as stated by J Forrest J in Doe v Howard [2015] VSC 75, namely:

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

(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.

In the meantime, common law courts have also reserved a right to refuse to enforce a foreign judgment in circumstances where: (e) it impugned offends against local ideas of substantial justice; (f) it was obtained in the foreign court contrary to the requirements of procedural fairness or natural justice; (g) it was procured by fraud; or (h) enforcement would be against Australian public policy.

In summary, once the four conditions (a)-(d) are established, the foreign judgment is prima facie enforceable unless one of the exceptions (e)-(h) is established. If a defendant wants to rebut the prima facie presumption of enforcement, it is for the defendant (judgment debtor) to establish such grounds.

2.2 Denial of natural justice or not

One of the key issues is whether the ‘denial of natural justice’ as the judgment debtor’s defense can be established.

The Trial Division of Victoria Supreme Court did not support such defense. By contrast, its Court of Appeal saw it in a refreshingly different way.

As noted by the Trial Division, the Ningbo Primary Court had made two attempts to serve the defendant. First, the Ningbo Primary Court arranged for a court in Hangzhou City to serve a copy of the complaint on Yin at the registered address listed on Yin’s Chinese resident identity card, as that address was located within the Hangzhou Court’s jurisdiction. But such attempt of service failed, as the Hangzhou Court certified that it had not been able to serve the documents as Yin had been ‘outside for a long time’. Then, the Ningbo Primary Court changed service to Yin, which was to be done by way of public announcement.

Although Yin’s counsel argued that a decision in Xu v Wang [2019] VSC 269 supported a proposition that a proceeding served by public announcement was not sufficient service for the purposes of Australian law, such that it constituted a denial of natural justice, the Trial Division disagreed. The Trial Division opined that such a proposition was confined to the facts of that case, as in those circumstances, service was not effected properly in accordance with the Chinese civil procedure law, however, such a finding is not comparable to this claim.

In contrast, the Victoria Supreme Court of Appeal held a different view, by pointing out a core question - whether, on the facts of the case, service by public notice or announcement was a complete answer to the defense based on denial of natural justice. In its view, this Chinese judgment should not be recognized on a summary basis, because “at the time Wu commenced the Chinese proceeding he well knew of a number of alternate means of giving notice of the proceeding to Yin, namely, by Twitter, WhatsApp and Telegram. Indeed, Wu’s case in the Chinese proceeding and in this Court was based on money paid under an alleged contract made by these means. In these circumstances, there is a case to be investigated at trial as to whether Wu informed the Chinese court of these alternative means of giving notice of the Chinese proceeding to Yin”.

III. Comments

Coming back to the question at the outset: is service of process by public announcement in Chinese courts sufficient service for the REFJ purposes under Australian law?

There are no easy answers here. It is case-specific and depends on whether such service is consistent with affording natural justice.

In assessing whether natural justice has been provided, the Victoria Supreme Court of Appeal introduced an illuminating perspective – “modern courts should move with the times in their assessment of the sufficiency of foreign modes of service which do not aim to give defendants personal notification by the many electronic means now commonly available. Courts should draw the line and look unfavorably on modes of service by foreign courts which do not attempt to give notice by such means where a defendant’s physical whereabouts are unknown but electronic notice in some form is possible”.

Take the case of Yin v Wu [2023] VSCA 130 for example, a “modern court”’ should also attempt to give notice by electronic notice in forms such as Twitter, WhatsApp, and Telegram, as such means are used by the litigants and should be tried first before the use of public announcement as the last resort of service. Under Chinese law, service by public announcement applies only when the whereabouts of the person to be served is unknown or service of process is not possible by any other means.

This is largely reasonable. But it is not feasible in this particular case because the three means listed here, Twitter, WhatsApp, and Telegram, are not available in China. There is no way that Chinese courts can use these three electronic means for service of process.

That being said, however, alternative electronic means of giving notice, such as WeChat, are available and frequently used by Chinese courts.

It is also worth noting that the recently amended Chinese Civil Procedure Law introduces more flexible methods for cross-border service of process to ensure procedural fairness and efficiency. For instance, electronic service is no longer limited to methods such as fax or email. Electronic service requires only an acknowledgement of receipt by the person to be served, unless such method of service is prohibited by the law of the country where the person to be served is located.

 

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Photo by Rafik Wahba on Unsplash

Contributors: Meng Yu 余萌

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