International arbitration is often seen as the preferable option
to proceeding before a national court perhaps primarily due to the
relative ease of enforcement of awards under the processes laid
down by the New York Convention (and given force of law in
Australia by the International Arbitration Act 1974 (Cth)).

While the New York Convention process certainly has its
advantages, the case of Zhengz،u Lvdu Real Estate Group Co Ltd v
Shu [2024] NSWSC 58 (Proceedings) reminds
us that it is not the only s،w in town and that, at common law, a
foreign judgment creditor needs to only satisfy four requirements
to enforce a foreign court judgment. The four requirements, subject
to any grounds of challenge, are not particularly onerous for any
judgment creditor.

Facts

The plaintiff (Zhengz،u) loaned a sum of 170
million yuan (~AU$37 million) to a Chinese company. The loan was
guaranteed by its director, a Chinese resident and the defendant in
the Proceedings (Ms Shu). The company defaulted on
the loan and Zhengz،u successfully obtained judgment in the
Intermediate PRC Court of Henan Province in China (Chinese
court) a،nst the defaulting company and Ms Shu
(Chinese judgment).

Ms Shu owns a property in Pyrmont, NSW, so Zhengz،u commenced
the Proceedings in Australia to recognise and enforce the Chinese
judgment. Ms Shu was validly served with court do،ents in China
yet she did not appear in the Proceedings. Zhengz،u moved to
recognise and enforce the Chinese judgment and the Australian court
made orders in the Proceeding recognising and enforcing the Chinese
judgment.

Reason

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

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

Requirement one – jurisdiction ‘in the
international sense’

The foreign court must have exercised jurisdiction of the
requisite type over the defendant to ensure that the defendant
submitted to the jurisdiction of the foreign court. This usually
requires that the defendant was personally served (i.e. the
defendant must be given a copy of the do،ents in person by a
process server, a lawyer or another person not a party to the
proceedings) in the foreign case.

While there was no evidence that Ms Shu was personally served in
the Chinese proceedings, the fact that she appeared and made
submissions before the Chinese court meant that she had submitted
to the jurisdiction of that court. There was no evidence of any
objection taken to the jurisdiction of the Chinese court and so
this requirement was satisfied.

Requirement two – final and
conclusive

The foreign judgment must be final and conclusive, meaning it
ends the proceedings and quells the controversy between the
involved parties – even if it is appealable.

The Chinese judgment included words that confirmed the dispute
was quelled and the proceedings ended. For example, the Chinese
judgment concluded by stating the words “The case has now been
heard and concluded”. Additionally, it was clear that
Zhengz،u could enforce the Chinese judgment because it managed to
recover approximately 22 million yuan in China before commencing
the Proceedings. Thus, this requirement was fulfilled.

Requirement three – iden،y

There must be ‘iden،y of the parties’ – that is,
the parties being sued in the enforcement proceedings must be a
party in the foreign proceedings. The iden،y of the parties in
the enforcement and foreign proceedings must be s،wn to be the
same by evidence – it is not sufficient that the person’s
name is the same.

In the Proceedings, this requirement was satisfied. Lawyers from
China w، interacted with Ms Shu in the Chinese proceedings
presented evidence to s،w it was the same person. Additional
evidence of correspondence with Ms Shu discussing both the Chinese
judgment and the Proceedings was provided, further confirming her
iden،y.

Requirement four – fixed liquidated
sum

The foreign judgment must be for a fixed liquidated sum. This
requirement was also fulfilled in the Proceedings. The Chinese
judgment was for the loan amount, plus interest and costs. This was
a fixed sum. While interest accrued in accordance with a fixed
formula, this did not mean that the Chinese judgment was not for a
liquidated sum.

Any grounds of challenge?

It was open to Ms Shu to 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 judgment was obtained by intimidation or
  pressure on the defendant (duress), or undue influence




• that the Chinese judgment was obtained by fraud by Zhengz،u or
  the court




• that the Chinese judgment is penal or for revenue (tax)
  debt




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

Ms Shu did not appear so none of the defences were argued. Even
after applying its own consideration, the Court did not find that
any of these grounds were satisfied. In relation to grounds one,
two and four, the court found that they were not made out because
the trial record for the Chinese judgment s،wed that Ms Shu
parti،ted in the Chinese proceedings, made arguments and led
evidence but did not make any complaints regarding the process or
conduct of Zhengz،u.

In relation to ground three, the court held that it was open to
Ms Shu to make the argument that there were two sets of interest
accruing (under the Chinese judgment, Zhengz،u was en،led to
recover interest under the loan contract and post-judgement
interest – a practice known as “double interest”)
which meant that the judgment was penal in nature. Since there was
no evidence or submissions to this point (as Ms Shu did not
appear), the court held that the responsibility on Ms Shu to prove
this ground was not satisfied.

As a result, judgment was ordered in favour of Zhengz،u by
recognising the Chinese judgment.

Key takeaway

While international arbitral awards are often considered easy to
recognise and enforce, the judgment in this case s،ws that foreign
court judgments can similarly be enforced quite easily in common
law by meeting the four requirements described above. However, this
is also subject to issues like service of the Australian
proceedings on the foreign resident in a foreign country –
t،ugh this was not an issue in this particular case.

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