A Chinese Judgment Denied Enforcement by Court of NSW Australia, Due to Defective Service by Post？

Key takeaways:

In March 2023, the Supreme Court of New South Wales, Australia ruled to refuse the enforcement of a Chinese monetary judgment on the ground that the judgment debtor had been denied procedural fairness arising from defective service by post (Zhou v Jing [2023] NSWSC 214).
This case shows how Australian courts assess the validity of service by post in foreign court proceedings, a crucial factor in determining procedural fairness and, ultimately, the enforceability of foreign judgments.
Under Chinese law, service by post is one of the alternative options to personal service, whereas service by public announcement is also one alternative method, but only works as a last resort.

On 14 March 2023, the Supreme Court of New South Wales, Australia (hereinafter “NSW Supreme Court”) ruled to refuse the enforcement of a Chinese monetary judgment on the ground that the judgment debtor had been denied procedural fairness arising from defective service (Zhou v Jing [2023] NSWSC 214). The Chinese judgment was made by the Primary People’s Court of Jinshui District, Zhengzhou, Henan Province (hereinafter “Zhengzhou Primary Court”) in 2018.

This is by far the third 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, and the second was Yin v Wu [2023] VSCA 130, both of which were decided by the Supreme Court of Victoria and involved the refusal to enforce Chinese judgments on the grounds of either “abuse of process” or “denial of natural justice”.

The crux of the debate is whether the defendant was denied procedural fairness. The answer is “yes”, according to the NSW Supreme Court, which found that the judgment debtor was deprived of her right to present the case because she was invalidly served with the Chinese proceedings.

It is essential to understand how Australian courts assess the validity of service in foreign court proceedings, a crucial factor in determining procedural fairness and, ultimately, the enforceability of foreign judgments.

I. Case Background

It is a dispute arising from a business arrangement in providing airline tickets and accommodation between the Plaintiff (judgment creditor), Ms. Anna Zhou, a Chinese national living in China, and the Defendant (judgment debtor), Ms. Xiaoli Jing, a Chinese national living in Australia.

On 23 May 2018, Zhou commenced civil proceedings against Jing in the Zhengzhou Primary Court. Following the filing of proceedings, it is the Court that serves the relevant documents on the defendant. In this matter, service was performed by post, initially by service to the address on Jing’s national identity card and, when that was ineffective, again by post, to the address on Jing’s household registration (“Hukou”). The service was ineffective because Jing did not live at either address. She had taken permanent residency in Australia in 2014. Jing was never personally served with the documents and had no notice of the action until after the court had entered judgment against her.

On 28 December 2018, Zhou obtained a default judgment against Jing in the Zhengzhou Primary Court for the sum of CNY 713,596 plus interest. As Jing did not know the judgment, she did not pay Zhou the judgment sum.

In May 2019, the Zhengzhou Primary Court granted Zhou an execution order and suspended Jing’s Chinese bank account.

On 3 March 2021, Zhou filed a statement of claim to start the Australian proceedings in the District Court (Parramatta Registry), which was later transferred to the NSW Supreme Court.

On 14 March 2023, the NSW Supreme Court ruled against Zhou, refusing the enforcement of the Chinese judgment in Australia.

II. Court Views

2.1 Assessment under the Australian Common Law

The Plaintiff’s amended claim was to enforce the Chinese judgment in Australia at common law. As introduced in a previous post, given that China is not a designated country under the relevant foreign judgments regulations such as the Foreign Judgments Act 1991 (Cth), the applications for recognition and enforcement of Chinese judgments are reviewed under Australia’s common law principles.

Four requirements must be satisfied for a foreign judgment to prima facie capable of recognition and enforcement at common law, as stated by Rothman J in Bao v Qu; Tian (No 2) [2020] NSWSC 588, namely:

(a) the foreign court must have exercised jurisdiction of the requisite type over the

Defendant;

(b) the judgment must be final and conclusive;

defendants in any enforcement action; and

(d) the judgment must be for a fixed, liquidated sum.

In summary, once the four conditions (a)-(d) are established, the foreign judgment is prima facie enforceable, unless one of the refusal grounds is established. If a defendant wants to rebut the prima facie presumption of enforcement, it is for the defendant (judgment debtor) to establish refusal grounds, such as the foreign judgment was obtained in the foreign court contrary to the requirements of procedural fairness or natural justice.

Court of NSW Australia Recognizes Chinese Judgment for the First Time (Bao v Qu; Tian (No 2) [2020] NSWSC 588)

2.2 Validity of service in determining procedural fairness

As the NSW Supreme Court put it, the validity of the service is a “significant issue” in this case. The key issue is to determine whether there is a “denial of procedural fairness”, including whether or not notice of the Chinese proceedings had been properly served on the defendant (at [22]).

The main task here for the Australian courts to do is not to assess whether “the Chinese Court had complied with service requirements”; rather, to investigate the question of whether “procedural fairness had been received by the defendant” (at [25]). After all, it is undisputed that the defendant did not become aware of the Chinese proceedings until after August 2019, several months after the Chinese judgment was entered and some enforcement measures were taken against her Chinese bank account.

Two main factors contributed to the Australian court’s conclusion that “the service on the defendant by post was invalid”(at [42]). One factor relates to an incorrect statement of the plaintiff’s lawyer to the Chinese court to the effect that the defendant had been forewarned of the proceeding. This misstatement comes from a transcript of the Chinese court proceedings, where the Chinese Court asked the plaintiff’s lawyer whether the defendant knew about the proceedings when the lawsuit was filed, and the lawyer responded affirmatively, saying “yes, we called and told her we had filed a lawsuit”. This answer is found to be misleading and incorrect, as it contradicts the plaintiff’s assertions that she had no contact with the defendant after 30 January 2018 (which is four months before filing the lawsuit in China) and that she did not instruct her lawyers to email or otherwise notify the defendant of the impending lawsuit (see at [26]).

The other factor comes down to the fact that the plaintiff had the defendant’s telephone number and Yahoo email address. Despite this knowledge, the plaintiff had no contact with the defendant after 30 January 2018. The Australian court, therefore, had the impression that armed with the knowledge of the defendant’s Zhengzhou address, the plaintiff proceeded with the intent of securing a judgment having provided the minimum amount of information to her lawyers, which, as a result, deprived the defendant of her right to be heard.

All in all, the invalidity of the service, together with the defendant not having had the opportunity to present her case, creates a circumstance of procedural unfairness (at [54]).

III. Comments

One lesson to be learned from this case and the like is that proper service of process is simply too important to ignore in order to have Chinese default judgments enforced in Australia.

In this case, it is the service by post that was examined by the NSW Supreme Court. In another case, take Yin v Wu [2023] VSCA 130 for example, it is the service by public announcements that was under the review of the Victoria Supreme Court.

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

As much as Australian courts emphasize the appropriateness of service on the defendant, rather than whether a particular method of service complies with the law of the state of origin, it is still necessary to clarify the various methods of service in Chinese proceedings, in particular the relationship among personal service, service by post and service by public announcements.

First in first, under the PRC Civil Procedure Law(CPL) and its judicial interpretations, a system of service is provided in an order that it starts from personal service, and then where personal service is not possible, goes through different alternative options - such as service by post, service by electric means - and ultimately, service by public announcements. In other words, service by post is one of the alternative options to personal service, whereas the service by public announcement is also one alternative method, but only works as a last resort.

Second, service by public announcements is the last resort in the sense that it applies only when the whereabouts of the person to be served is unknown or the service of process is not possible by any other means.

Back to this case discussed in this post, supposing that the service on the defendant by post is not successful (which is very much the reality), what Chinese courts should do is not merely rely on what the plaintiffs say, but check what is on the receipt of service and act accordingly.

For instance, as in the case tried by China’s Supreme People’s Court (SPC), (2020) Zui Gao Fa Zhi Min Shen No. 6 ((2020)最高法知民申6号), if the receipt reads “the delivery was not possible as the subject cannot be reached via the provided phone number”, then the Chinese Court should try other possible means as provided by the CPL, and only when the service of process is not possible by any other means, the Court can then go for service by public announcements.

For another example, as in another SPC case, (2020) Zui Gao Fa Min Shen No. 4185 ((2020)最高法民申4185号), when the receipt reads “the subject cannot be found at this address”, it can be determined as “the whereabouts of the person to be served is unknown”, and the Court can directly go for service by public announcements.

Photo by 天琦王 on Unsplash

Contributors: Meng Yu 余萌