New Zealand Court Enforces Chinese Judgment Despite “Natural Justice” Challenge

Key takeaways:

In December 2024, the New Zealand High Court enforced a Chinese judgment ordering repayment of approximately NZD 24 million (Hebei Huaneng Industrial Development Co Ltd v Shi [2024] NZHC 3656).
The New Zealand court rejected the judgment debtor's natural justice defense after detailed analysis, finding no violation of New Zealand standards despite arguments about the absence of “hearing”.
The New Zealand Court clarified that the relevant standard is New Zealand’s own conception of natural justice, not strict compliance with Chinese procedural law.
The ruling suggests that natural justice defenses may be more persuasive in default judgment cases, but less so where the debtor actively participated in the original proceedings.

On 4 Dec. 2024, the High Court of New Zealand (hereinafter the “New Zealand Court”) ruled to enforce a Chinese monetary judgment (Hebei Huaneng Industrial Development Co Ltd v Shi [2024] NZHC 3656). The Chinese judgment was made by the Hebei High People's Court (HHPC), the court of second instance, in 2019 ((2019) Ji Min Zhong No. 817 ((2019)冀民终817号)).

This is the third reported case of a Chinese judgment being recognized in New Zealand, according to the CJO database.

1. Case Background

The dispute arose from coal supply dealing between the Plaintiff, Hebei Huaneng Industrial Development Co Ltd (“Huaneng”), a Chinese state-owned enterprise, and three Defendants, Qinhuangdao Boen Trading Company Ltd (“Boen”), a Chinese company, together with its actual controller, Mr. Deming Shi, and an allegedly affiliated company, Tangshan Seaport Detai New Material Technic Company Ltd (“Detai”).

In 2012, Huaneng agreed to pay Boen for the supply of coal. The companies entered a series of supplementary agreements. Under them, Huaneng made advance payments to Boen to facilitate the coal supply. The first advance payment totaled RMB 103,426,379.28, or approximately NZD 24,000,000. Boen was obliged to repay Huaneng’s advance payment(s) on termination of its supply agreement(s) with Huaneng.

In March 2015, Mr. Shi guaranteed Boen’s obligation to repay the advance payment(s). The guarantee was expressed as being “joint and several”. Detai provided a security in relation to its guarantee. In 2016, the parties agreed that Boen owed Huaneng RMB 43,210,000 for coal it had failed to supply, and RMB 30,000,000 concerning an additional advance payment. Boen failed to make any payment to Huaneng.

In December 2017, Huaneng filed a lawsuit against Boen, Mr. Shi, and Detai before the

Shijiazhuang Intermediate People’s Court of Hebei Province (“SIPC”), seeking a total of RMB 176,636,379.28 and interest. Both Boen and Mr. Shi defended the claim, and Detai was served but did not participate.

In 2018, the SIPC ruled partly in favor of Huaneng (see (2018) Ji 01 Min Chu No. 39 ((2018) 冀01民初39号)), holding that Boen was required to repay what it described as coal arrears and interest to Huaneng, and Huaneng was entitled to enforce the security provided by Detai. However, the SIPC dismissed Huaneng’s claim against Mr. Shi on the basis his guarantee was time-barred (or had expired).

Huaneng appealed against the SIPC judgment to the HHPC.

In August 2019, the HHPC render the final judgment (the “Chinese Judgment”), upholding Huaneng’s appeal in relation to Mr. Shi, and ruling that Mr. Shi was liable under the guarantee to pay Huaneng RMB 103,426,379.28, the amount of the first advance payment (see (2019) Ji Min Zhong No. 817).

In December 2019, Huaneng made an application for enforcement of the Chinese Judgment before the SIPC, but no significant assets were found in mainland China.

Huaneng later discovered Mr. Shi has assets in New Zealand. Consequently, in 2020, Huaneng applied to enforce the Chinese Judgment before the New Zealand Court, requiring payment, by Mr. Shi, of approximately NZD 24,000,000.

On 4 Dec. 2024, the New Zealand Court ruled in favor of the judgment creditor, Huaneng.

2. Court Views

The proceedings in New Zealand lasted for over four years, starting from May 2020, when Huaneng sought freezing and ancillary orders in relation to Mr. Shi’s assets in New Zealand, which were granted in June 2020.[i]

Huaneng first applied for summary judgment to enforce the PRC judgment in New Zealand pursuant to the common law. But, at the jurisdiction stage, Mr. Shi raised a jurisdictional challenge, arguing that “China does not have true courts” for the purpose of judgment recognition in New Zealand.[ii] Associate Judge Bella rejected this somewhat unprecedented argument in 2020.[iii] One year later, when faced with the same argument, Associate Judge Sussock examined it in greater detailes, and considered that Mr. Shi had an arguable defence either on the basis that “the foreign judgment is not a judgment of a court as that term is understood for the purposes of recognition” or on that “one of the exceptions to recognition, namely a breach of natural justice, may be available”, dismissing the summary judgment application.[iv] (More analysis can also be found in a post on CoL by Mr. Jack Wass (Stout Street Chambers, New Zealand).)

The case then went to trial, shortly after the New Zealand Court dismissed Huaneng’s application for leave to appeal the judgment dismissing the summary judgment.[v] The criteria for enforcement in New Zealand at common law are clear. Mr. Shi accepted that the Chinese Judgment meets three prerequisites in that (a) the Chinese Court had jurisdiction over the dispute; (b) the Chinese Judgment was for a definite sum; and (c) the Chinese Judgment was final and conclusive.

However, the judgment debtor, Mr. Shi, raised the “natural justice” defense, arguing that the Chinese Judgment was obtained in circumstances constituting a breach of natural justice, based on two sub-arguments: (a) there was no hearing, as such, in the Chinese Court, which was also contrary to Chinese law; and (b) Procedural and other shortcomings exist in relation to Detai, which might have compromised Mr Shi’s rights.

The New Zealand Court rejected Mr. Shi’s sub-arguments in a detailed analysis. For the first sub-argument, by citing Hook and Wass’s The Conflict of Laws in New Zealand, the Court pointed out that “Natural justice requires that the judgment debtor had adequate notice of the proceedings; and a fair opportunity of putting their case before an impartial tribunal”.[vi] Considering that there was a hearing (be it open to the public or not), that the judgment debtor was presented and able to advance a defense in Chinese court proceedings, and that there were no suggestion of bias on the part of the Chinese Court, that Court being subject to an influence, as a matter of result, there was no such violation of New Zealand standards of natural justice absent a hearing, as that term is understood in Chinese law (at [33]). For the second sub-argument, it is “camouflaged attacks” on the merits of the Chinese Judgment, an issue that a New Zealand Court would not address (at [52]).

3. Comments

Once again, the “natural justice” defense came to the spotlight when a Chinese judgment was sought to be enforced in a common law jurisdiction. It’s always interesting to see how the requested courts assess this defense.

In the view of the New Zealand Court, the key question is whether what occurred violates “New Zealand standards of natural justice”, not whether the court of origin followed its own law.[vii] As discussed in this case, “New Zealand standards of natural justice” require “adequate notice of the proceedings”, and “right of defense and to a fair trial”.

Readers familiar with PRC rules of foreign judgment enforcement will easily spot the similarities in “Chinese standards of natural justice”. Under Art. 300 of the PRC Civil Procedure Law (2023), the Chinese version of natural justice also emphasizes the litigants' procedural rights, encompassing the right to be legally summoned, the right to be heard, and the right to representation.

In any case, the “natural justice” defense, or other similar defenses such as “denial of procedural fairness”, may be more persuasive in default judgments, as we have seen in Australian cases such as Yin v Wu [2023] VSCA 130, and Zhou v Jing [2023] NSWSC 214, but less so if the judgment debtors actively participated in the original proceedings.

[i] Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2470 [22 September 2020], at [7].

[ii] Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2992 [12 November 2020], at [2].

[iii] As Associate Judge R M Bella noted, “as far as I am aware, this is the first case where it has been argued that in contemporary China there are no courts, as we understand them” (Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2992 [12 November 2020], at [59]).

[iv] Hebei Huaneng Industrial Development Co Ltd v Shi [2021] NZHC 2687 [8 October 2021], at [91].

[v] See Hebei Huaneng Industrial Development Co Ltd v Shi [2022] NZHC 1484 [23 June 2022], [2022] NZCA 534 [10 November 2022].

[vi] Hebei Huaneng Industrial Development Co Ltd v Shi [2024] NZHC 3656 [4 December 2024], at [15].

[vii] Hebei Huaneng Industrial Development Co Ltd v Shi [2024] NZHC 3656 [4 December 2024], at [23].

Photo by Kerin Gedge on Unsplash

Contributors: Meng Yu 余萌

China Legal Trends