Key takeaways:
- In March 2018, the Supreme Court of British Columbia, Canada refused to give a summary judgment in favor of a Chinese judgment creditor on the ground of finality (Xu v Yang, 2018 BCSC 393).
- In the absence of expert evidence on the relevant Chinese law and procedure, the Canadian court was unwilling to make any conclusive findings on the legal effect of the Chinese judgment. Consequently, the Canadian court did not give legal effect to the Chinese judgment on the basis of this finality ground.
On 13 Mar. 2018, the Supreme Court of British Columbia, Canada (“the Canadian Court”) refused to give a summary judgment in favor of a Chinese judgment creditor on the ground of finality (see Xu v Yang, 2018 BCSC 393). The Chinese judgment at issue was rendered in October 2016 by Yong’an Primary People’s Court, Sanming, Fujian Province (“the Chinese Court”).
According to the Canadian Court, in the absence of expert evidence on the relevant Chinese law and procedure, the Canadian judge was not prepared to make any conclusive findings on the legal effect of the Chinese judgment. Consequently, the Canadian court did not give legal effect to the Chinese judgment on the basis of this finality ground.
I. Case Overview
The case involves two actions, Action No. S147934 and Action No. S158494.
In Action No. S158494, the Plaintiff is Gui Fen Xu, and the Defendants are Wen Yue Yang, Qing Ping Weng and Wen Bin Yang. In Action No. S158494, the Plaintiff is Rui Zhen Chen, and the Defendants are Wen Yue Yang, Jingping Weng, Yong’an City Tian Long Textile Dyeing and Finishing Co., Yong’an City Shenlong Steel Structure Co., Shihua Lai and Wen Bin Yang. Gui Fen Xu (“Ms. Xu”), Plaintiff in Action No. S158494, and Mr. Rui Zhen Chen (“Mr. Chen”), Plaintiff in Action No. S158494, are a couple. As there was a substantial overlap between the two actions on the issues to be determined, the Canadian Court heard both matters together.
This post now takes Action No. S158494 as an example.
The Plaintiff and Defendants entered into a loan agreement such that Ms. Xu advanced to the Defendants, three tranches of CNY 500,000 on each of December 21, 2012, February 17, 2013, and March 18, 2014 (the “Loan Agreement”). The defendants were required to pay interest of 1.5% per month or 18% per annum, with repayment of each tranche in full to be made within one year of advancement. Ms. Xu argued that the defendants breached the terms of the Loan Agreement by failing to pay the amounts due under it and as a result, she had suffered loss, damage, and expenses.
Ms. Xu asserted that by agreement on November 9, 2014, three defendants, including the defendant Shi Wua Lai (“Ms. Lai”), signed as guarantors to the Loan Agreement (the “Guarantor Agreement”). It is alleged by Ms. Xu that Ms. Lai pledged real estate she owned in Surrey, B.C. as security for the Guarantor Agreement.
In April 2016, Ms. Xu brought a summary trial application (R. 9-7) for judgment against the defendants (see Xu v. Lai, 2016 BCSC 836). However, such application was later turned down because the Court concluded that this was not an appropriate matter for disposition by way of summary trial.
Also in 2016, the Defendants in this matter commenced litigation in the Chinese Court, seeking termination of the Loan Agreement and the Guarantor Agreement.
On 17 Oct. 2016, the Chinese Court ruled to reject the claims of the Defendants, saying that ‘if either party does not agree with the Court’s judgment it can file an appeal with the Sanming Intermediate Court in Fujian Province within 15 days after the Judgment is released’.
On 28 Feb. 2018, Ms. Xu sought an order for a Summary Judgment, requesting that the Chinese judgment be given legal effect by the Canadian Court.
The Canadian Court noted that there is no credible evidence that an appeal of the Chinese Court Decision was filed, and that the applicant did not adduce any expert evidence with respect to Chinese law, Chinese court proceedings, or the legal effect of the Chinese Court Decision. In its view, “it was not clear whether the decision of the Chinese Court is final and conclusive”, and “it is also not clear what the appeal process is”.
The Canadian Court held that “there is no expert evidence on Chinese law and, as a result, it is not clear that the Chinese Court Decision is final and conclusive. Therefore, there is an insufficient basis before me (the judge) to treat this decision of the Chinese Court as one that should be relied upon by this Court”.
Consequently, the Canadian Court refused to give legal effect to the Chinese judgment.
II. Our Comments
By quoting Wei v. Mei, 2018 BCSC 157, the Canadian court listed out the three requirements for a foreign judgment to be recognized and enforceable in British Columbia: (a) the foreign court had jurisdiction over the subject matter of the foreign judgment; (b) the foreign judgment is final and conclusive; and (c) there is no available defence.
The finality requirement – being final and conclusive- is one of the key requirements for a foreign judgment to be recognizable and enforceable in Canada.
This case involves a first-instance judgment rendered by the Chinese Court, which, under Chinese law, takes effect as long as the parties do not appeal.
The crux of the matter is the finality of a Chinese judgment and Chinese law. Although the Canadian court acknowledged that there was no credible evidence of an appeal by the defendant, it stated that it did not know Chinese law and therefore did not know whether the absence of an appeal meant that the first-instance judgment was final. As a result, in the absence of expert evidence, the Canadian court was unwilling to make conclusive findings on the legal effect of the Chinese judgment and refused to give legal effect to the Chinese judgment.
We have seen the phenomenon of parties providing the court with experts on Chinese law in many such cases. This case serves as a counter-example of the importance of providing evidence on Chinese law, including expert witnesses, to foreign courts.
Photo by Eugene Aikimov on Unsplash
Contributors: Guodong Du 杜国栋 , Meng Yu 余萌
