Federal Court of Australia

Guangzhou Huada Venture Capital No 1 Investment Enterprise (Limited Partnership) v Zhu [2024] FCA 938

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 8(3) of the International Arbitration Act 1974 (Cth), declare that the applicant is entitled to enforce Arbitral Award [2022] ZGMZJCZI No. 1405 of the China International Economic and Trade Arbitration Commission (the Award) against Lifang Zhu and Binbin Jin as if it were a judgment of the court.

2.    Judgment be entered in favour of the applicant against the respondents for the following amounts in the terms of the award:

(a)    RMB 10,622,894.14 yuan (order (II) of the Award);

(b)    RMB 190,000 yuan (order (III) of the Award);

(c)    RMB 44,778.16 yuan (order (IV) of the Award); and

(d)    RMB 554,893 yuan (order (V) of the Award).

3.    The respondents fulfill the obligation to buy back 3,333,333 shares of Suzhou Garden Construction Industry Co Ltd, held by the applicant, and pay the applicant a share buyback price of RMB 38,344,109.59 yuan.

4.    The respondents pay the applicant’s costs of the proceedings.

5.    The freezing orders made on 24 June 2024 as amended on 28 June 2024 be extended until midnight on 14 February 2025 or until further order.

6.    The matter be listed for case management on 14 February 2025.

7.    By 11 February 2025, the applicant file a brief affidavit of any facts justifying further extension of the freezing orders including any steps taken as to execution on the judgment.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(delivered ex tempore)

STEWART J:

1    This application for the enforcement of a foreign arbitral award was commenced by the filing of an originating application in February of this year. Freezing orders were also sought. The matter has been delayed over time, principally arising from efforts to serve on the respondents in Australia and also to locate assets of theirs in Australia.

2    Be that as it may, without service having been achieved, on 21 June 2024 the respondents, through a solicitor, filed a notice of acting – appointment of lawyer on Form 4. That notice does not in any way indicate that it was filed conditionally, and neither was any application by the respondents to set aside the originating application filed, as contemplated by r 13.01(3) of the Federal Court Rules 2011. In those circumstances, the respondents have submitted to the jurisdiction of the Court. Further, they are, through their solicitor, taken to have received notice of the proceeding and of the documents filed in the proceeding.

3    By a notice of ceasing to act filed on 30 July 2024, the respondents’ solicitor withdrew. Also filed on that day with the notice of ceasing to act was a notice of intention to cease to act dated 19 July 2024. By that notice, the solicitor is taken to have given the respondents notice that, seven days thereafter, the solicitor would have ceased to act and that the respondents were required, within five days after the notice, to file a notice of address for service. No notice of address for service has been filed. The notice of ceasing to act gives a last known residential or business address of the respondents at a residential property in Toorak, Victoria. It is, however, known from earlier attempts to serve on the respondents that they are not actually resident at that address. The notice of ceasing to act also gives an email address for the respondents.

4    On 26 July 2024, I made orders listing the matter for final hearing on the application for enforcement of the arbitral award, and judgment on the award, today. Those orders also provided for service of the orders, which is to say, to give notice of the listing on the respondents’ then still solicitors. There is no appearance by the respondents today.

5    The applicant has, by affidavit evidence, satisfied me that there was service of the notice of the hearing today on the respondents’ now former lawyers and also to the email address given for them by those former lawyers in the notice of ceasing to act. For those reasons, I am more than satisfied that the respondents have had proper and adequate notice of the hearing today. For whatever reason, they have not appeared.

6    Turning now to the application for enforcement of the arbitral award, the following matters are pertinent.

7    On or about 23 May 2017, a number of parties, including the applicant and the two respondents, entered into a contract titled Capital Increase Agreement. That agreement concerned a separate company named Suzhou Gardens Construction Industry Co Ltd, which I will refer to as Suzhou Gardens. By the Capital Increase Agreement, Suzhou Gardens agreed to issue additional shares to a number of parties including the applicant. Those parties in turn agreed to subscribe to those shares.

8    The respondents were collectively identified in the Capital Increase Agreement as the “actual controller”. Another company, Jiangsu Gusu Garden Construction Investment Holding Group Co Ltd, which I will refer to as Jiangsu, was also a party to the Capital Increase Agreement. Under the terms of that agreement, the respondents assumed a number of obligations, including to “do their best” to meet the conditions precedent to the agreement.

9    On or about the same day, a number of parties entered into a separate contract titled Agreement on Valuation Adjustment and Preferential Rights, which I will refer to as the second agreement. The parties to the second agreement were not identical to the parties to the Capital Increase Agreement. However, relevantly, the applicant, the first and second respondents and Jiangsu were parties to both agreements. The first and second respondents were also identified in the second agreement as the “actual controller”. Jiangsu was referred to as the “controlling shareholder”.

10    The second agreement relevantly provided that if Suzhou Gardens “didn’t realise eligible for listing before 31 December 2022” (noting that I am using an English translation of the Chinese original) then “the investor has the right to require the controlling shareholder and actual controller to repurchase the company’s shares” at the stipulated price. The investor was defined to include the applicant. The second agreement also contained a dispute resolution clause providing for any dispute between the parties caused by a performance efficacy or interpretation of the agreement to be resolved through “friendly negotiation” and, thereafter, for arbitral settlement by the China International Economic and Trade Arbitration Commission, known as CIETAC, in Beijing. It was provided that the arbitration award is definitive and has binding force to all parties.

11    On 23 November 2020, the applicant sent a written notice to the first and second respondents and Jiangsu concerning the buyback of the shares. That notice sought a negotiation and stated that if the recipients failed to renegotiate and implement the buyback of the shares, then the applicant would assert a claim through legal means, including arbitration. On 6 August 2021, the applicant submitted a request for arbitration to CIETAC against the respondents and Jiangsu. On 21 June 2022, CIETAC issued an arbitral award and awarded relief in favour of the applicant against the first and second respondents and Jiangsu, who is referred to in the award as the third respondent.

12    The terms of the award as translated into English are as follows:

Based on the above facts and reasons, the Arbitral Tribunal decided as follows after panel discussion:

(I)    The first respondent, the second respondent and the third respondent fulfill the obligation to buy back 3,333,333 shares of Suzhou Garden Construction Industry Co., Ltd. held by the applicant, and pay the applicant a share buyback price of RMB 38,344,109.59 yuan;

(II)    The first respondent, the second respondent and the third respondent shall pay the applicant the compensation for damage of RMB 3,067,528.77 yuan for overdue payment of the buyback price together with further compensation for damage, which shall be calculated from March 1, 2022 to the actual payment date based on RMB 38,344,109.59 yuan at an annual interest rate of 8%;

(III)    The first respondent, the second respondent and the third respondent shall pay the applicant the attorney’s fee paid by the applicant for this case of RMB 190,000 yuan;

(IV)    The first respondent, the second respondent and the third respondent shall pay the applicant the preservation fees of RMB 5,000 yuan and a preservation insurance fees of RMB 39,778.16 yuan incurred in this case and paid by the applicant for this case;

(V)    The arbitration fee in this case is RMB 554,893 yuan, all of which shall be borne by the first respondent, the second respondent and the third respondent. In view of the fact that the arbitration fee in this case has been paid in full by the applicant, the first respondent, the second respondent and the third respondent shall pay RMB 554,893 yuan to the applicant to compensate the arbitration fee paid by the applicant on its behalf;

For matters to be performed by the first respondent, the second respondent and the third respondent in the above award, the first respondent, the second respondent and the third respondent shall complete the performance within twenty days from the date of this award.

This award is final and shall take effect as of the date of making it.

13    In seeking to enforce the award under the International Arbitration Act 1974 (Cth), there are a number of matters that the applicant must satisfy.

14    First, the award must be a “foreign award” as required by s 8(1), read with s 3(1) of the Act. A foreign award means, “An arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.” By Art 1(1) of the New York Convention, which is schedule 1 to the Act, and Australia not having made the reservation referred to in Art 1(3), it is not necessary that the foreign state is a contracting state to the New York Convention. Self-evidently, the CIETAC award is a foreign award under the Convention.

15     Also, it is necessary that the subject matter of the arbitration is “capable of settlement by arbitration” as referred to in Art 2(1) of the Convention. Clearly, this commercial dispute is of such a nature that it is capable of settlement by arbitration.

16    There are then some requirements set out in r 28.44(2)(a) of the Rules. It is required that there be a duly authenticated original award, or a duly certified copy. I am satisfied of those requirements with reference to the exhibit to the affidavit of Mr Shen dated 23 February 2024.

17    There must also be produced the original arbitration agreement under which the award purports to have been made, or a duly certified copy. I am satisfied in respect of there being a copy, also with reference to Mr Shen’s exhibit.

18    Further, since neither of those documents is in English, there must be a translation of each, which indeed there is, certified as correct. So, I am satisfied of that requirement.

19    Then, under r 28.44(2)(b), it is required that there be an affidavit stating the extent to which the foreign award has not been complied with at the date the application is made. In that regard, the applicant relies on the affidavit of its solicitor Fong Jacqueline Yick dated 14 August 2024. Unfortunately, that affidavit in paragraph 6 refers to the award not having been complied with in any respect “by the Respondent”. On one view, that is not sufficient because there are two respondents to the application. However, I am satisfied that the omission of the plural is an inadvertent error by Ms Yick. I infer that from the general tenor and content of the affidavit which otherwise refers to the respondents together, and also from the fact that there is no single respondent. That reference has to be read as being to either one of the respondents or both of them, and it makes no sense to read it as being one of them without it being identified which one. I am therefore satisfied as this requirement.

20    It is also necessary that the usual or last known place of residence or business of the person against whom the award is sought to be enforced is stated on affidavit. That has been done.

21    In all the circumstances, I am content to enforce the award. Indeed, I am satisfied that under s 8(3A), I must enforce the award. In that regard, I accept the submission by Mr Chiam that I do not need to consider the various bases for resisting enforcement set out in s 8(5) of the Act because those do not arise unless raised “at the request of the party against whom [the foreign award] is invoked”. As mentioned, the respondents have not appeared and do not raise any objection to enforcement of the award.

22    That said, there are a few issues that Mr Chiam has had to address in convincing me of the enforceability of the award.

23    First, the affidavits relied on are affidavits of Australian solicitors giving evidence on the basis of information and belief, save for matters of service in this jurisdiction, in respect of which I take them to have first-hand knowledge. I was satisfied and ordered under s 190(3) of the Evidence Act 1995 (Cth) that the hearsay rule did not apply to the affidavits. That was on the basis that the matters to which that evidence relates are not genuinely in dispute. The respondents have had, as I have indicated, ample opportunity to dispute any matters raised in the applicant’s application and have chosen not to do so. There is no evidence of any dispute of any matters before me.

24    Another issue is the proper form of relief in enforcing the award in relation to paragraph 1 of the award. I am satisfied that the best and justifiable way of doing that is to repeat the terms of the award itself in the judgment and that, given the respondents’ submission to the jurisdiction, that is a proper order to make.

Associate:

Dated:    19 August 2024