Resources

Are foreign mediation judgments enforceable in Australia? The Supreme Court of NSW says yes: Bank of China Limited v Chen [2022] NSWSC 749

Bank of China Limited v Chen [2022] NSWSC 749

In Australia, the question of whether a foreign judgment is enforceable will depend on where the judgment was made, and the type of judgment issued. In particular, where treaty or statutory sources of law are unavailable, parties must rely on common law principles to seek to enforce a judgment in Australia.

In Bank of China Limited v Chen [2022] NSWSC 749, the Supreme Court of New South Wales held that two civil mediation judgments handed down by a Chinese Court embodied judgments at common law and could be enforced as foreign judgments in Australia. This decision illustrates that in NSW, parties can seek to enforce a decision of a foreign court, as long as the decision possesses the essential elements of a judgment as required by Australian law, namely, that it gives rise to res judicata, is mandatorily enforceable and has coercive authority. The decision is also the first instance where the Supreme Court of NSW has enforced Chinese civil mediation judgments.

Background to the case

Bank of China Limited (Bank) and Ms Ying Chen were parties to two separate civil proceedings in the People's Court of the People’s Republic of China, concerning a financial loan dispute. Following a judicial mediation that occurred by consent, the parties checked and signed the transcript of the proceedings, and the People's Court issued two mediation judgments.

The Bank subsequently filed a Summons in the Supreme Court of New South Wales, seeking to enforce the two mediation judgments against Ms Chen without seeking leave of the Court, on the basis that leave was not required pursuant to Rule 11.4 and Schedule 6(m) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), as the originating process being served sought to recognise or enforce a “judgment”.

Ms Chen filed a Notice of Motion seeking to set aside the Summons, on the basis that the two mediation judgments were not “judgments” and as a result, the Bank required leave of the Court to serve its Summons outside Australia.

The parties’ position

The parties agreed that Chinese judgments may be enforceable in Australia under the common law procedure for the enforcement of foreign judgments

The parties accepted that the two mediation judgments were not enforceable in Australia through statutory means but may be enforceable under the common law, in accordance with the principles set out in Bao v Qu; Tian (No 2) [2020] NSWSC 588 (Bao). In Bao, the Court held that at common law, a foreign judgment is prima facie capable of recognition and enforcement if the following requirements are met:

  • the foreign court must have exercised jurisdiction of the requisite type over the defendant, also known as jurisdiction “in the international sense”; •
  • the judgment must be final and conclusive;
  • there must be identity of parties between the judgment debtors and the defendants in any enforcement action; and
  • the judgment must be for a fixed, liquidated sum.


Ms Chen’s position

Ms Chen contented that the two mediation judgments did not embody judgments as it was necessary to consider whether they were judgments, as a matter of Chinese law, rather than under Australian law. Ms Chen relied on expert evidence to the effect that the two mediation judgments were not judgments, as a matter of Chinese law, as they:

  • were mediation agreements which, although they have the benefit of enforcement mechanisms under the law of China, they are only documents recording a contract between the parties;
  • were not signed by any party and accordingly under Chinese law, they have no legal effect; and
  • do not purport to be judgments on their face. The two mediation judgments are referred to as “Minshi Tiaojie Shu” (MTS), which was translated to mean a variety of terms, including “civil mediation judgment”, “civil mediation agreement” and “mediation agreement”.


Accordingly, Ms Chen contended that the two mediation judgments could not be enforced in accordance with the principles in Bao. Further, as the Bank required leave to serve the Summons (given that the two mediation judgments did not embody judgments), and as it did not seek leave, the Court ought to exercise its discretion and set the Summons aside.

The Bank’s position

The Bank contended that the two mediation judgments:

  • possessed all the necessary characteristics of a judgment under Australian law and accordingly, the service outside Australia of the Summons in respect of the recognition and enforcement of them did not require leave pursuant to Schedule 6(m) of the UCPR; and
  • otherwise satisfied the four elements set out in Bao and accordingly, they were prima facie enforceable.


​​​Further, even if the Court were to determine that the two mediation judgments did not constitute judgments for the purposes of Rule 11.4 and Schedule 6(m) of the UCPR, the Bank contended that this would only require that leave of the Court be obtained, which the court could give nunc pro tunc.

The NSW Supreme Court’s decision

Her Honour Associate Judge Harrison ultimately dismissed Ms Chen’s Notice of Motion, for the following reasons.

The two mediation judgments embodied judgments and are enforceable

Her Honour rejected Ms Chen’s contention that the Court’s task was to consider whether the two mediation judgments embodied judgments pursuant to Chinese law and found that the Court must consider whether the two mediation judgments are judgments under Australian law.

Her Honour held that the two mediation judgments embodied judgments as a matter of law, as the following factors established that they gave rise to res judicata, are mandatorily enforceable and have coercive authority:

  • the transcript of the two proceedings before the People’s Court recorded that the parties had reached agreement, which was to take effect upon both of the parties signing, or applying their fingerprints on, the transcripts, and the parties’ legal representatives did, in fact, sign the transcripts;
  • each of the two mediation judgments were affixed with the seal of the People’s Court;
  • the uncontested expert opinion was that an MTS has the same legal effect as a Chinese civil judgment; and
  • the expert opinion from the Bank’s Chinese law expert, accepted by her Honour, was that:
  • the two mediation judgments were enforceable immediately according to their terms in China and without the need for further or other order or judgment of the People’s Court;
  • the parties cannot cancel or vary the two mediation judgments without the permission of the Jimo District Court; and2
  • it is not necessary for the parties to sign the two mediation judgments for them to be effective, as the Court’s stamp being affixed and their service upon the parties is sufficient.

Her Honour held that the absence of Chinese characters which, on translation, meant judgment in a literal sense was of little consequence. Her Honour also rejected Ms Chen’s contention that a registration process (that is, the fact that the two mediation judgments required the consent of the parties) which falls short of a foreign court exercising its authority to make a determination lacks the characteristics of a judgment. Her Honour drew a comparison to consent judgments in NSW, which are created by the parties’ consent, but nevertheless are judgments that are mandatorily enforceable and have coercive authority.

Her Honour also found that evidence of enforcement of Chinese mediation judgments as judgments in other common law jurisdictions, namely, British Columbia, Hong Kong and New Zealand were helpful but not determinative.

The two mediation judgments are enforceable in Australia under the common law

Her Honour held that each of the requirements to enforce a judgment at common law were satisfied as:

  • the People's Court exercised jurisdiction in “the international sense” over Ms Chen, as Ms Chen’s authorised legal representative appeared before the People’s Court on her behalf, the parties agreed to the outcome of those proceedings and signed the transcripts, following which the People's Court issued the two mediation judgments;
  • the two mediation judgments were final and treated as res judicata by the People's Court;
  • Ms Chen was identified as a defendant in the two proceedings before the People's Court; and
  • the two mediation judgments referred to a fixed amount for payment of principal and interest.

Conclusion

In today’s global economy, enforcement of foreign judgments in Australia is increasingly important. The NSW Supreme Court’s decision in Bank of China Limited v Chen [2022] NSWSC 749 illustrates that NSW Courts will recognise a decision of a foreign court under the common law procedure for the enforcement of foreign judgments (that is, where treaty or statutory sources of law are unavailable) as long as it possesses the essential elements of a judgment as required by Australian law.[i]


[i] [Note: The above material provides a summary only of the subject matter covered, without an assumption of a duty of care by Resolution Institute or Clayton Utz. The material is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Copyright in the material is owned by Clayton Utz.]