Federal Court of Australia

Shenzhen Xinhe Hongshi Investment and Consultancy Co Ltd v Shandong Ruyi Technology Group Co Ltd [2025] FCA 860

ORDERS

THE COURT ORDERS THAT:

1.    The defendant’s amended interlocutory application dated 4 July 2025 be dismissed.

2.    The defendant pay the plaintiff’s costs of the amended interlocutory application.

3.    The proceeding be listed for case management on 8 August 2025.

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

REASONS FOR JUDGMENT

(Delivered ex tempore; revised from transcript)

STEWART J:

Introduction

1    The plaintiff and the defendant are both Chinese corporations. The plaintiff alleges that the defendant is indebted to it in a sum equivalent to more than $85 million. The debt arises from proceedings commenced by the plaintiff in the Shenzhen Municipal Intermediate People’s Court in which it obtained judgment against the defendant on 31 December 2021 for an amount equivalent to more than $44 million.

2    Following an appeal which left the judgment amount against the defendant undisturbed, the plaintiff commenced enforcement proceedings in China from which it was only able to recover approximately $1.2 million. Despite a number of other proceedings and efforts at recovering the judgment debt, the plaintiff has been unable to recover the amount owing. The current quantum of the debt is ascribed to the accumulation of interest.

3    By amended originating process, in the principal proceeding the plaintiff seeks, amongst others, orders recognising the foreign judgment and winding up the defendant under s 583 of the Corporations Act 2001 (Cth). That section confers power on the Court to wind up a “Part 5.7 body” where, relevantly, the Part 5.7 body is unable to pay its debts (s 583(c)(i)). Section 585 sets out a range of circumstances in which a Part 5.7 body “is taken to be unable to pay its debts”.

4    A Part 5.7 body is defined in s 9 of the Act, and relevantly includes a “registrable body that is a foreign company and … is not registered under [Division 2 of Part 5B.2] but carries on business in Australia”. A “registrable body” includes a foreign company, which (also under s 9) includes a body corporate that is incorporated outside of Australia. There is no dispute that the defendant is a body corporate incorporated in China, and therefore a registrable body within the meaning of the Act. The issue in dispute as to whether the defendant is a Part 5.7 body is accordingly whether it “carries on business in Australia”. That is a fact intensive inquiry.

5    On 29 November 2024, Markovic J made orders in the proceeding granting leave under r 10.43 of the Federal Court Rules 2011 (Cth), “[t]o the extent necessary”, to serve the amended originating process and accompanying affidavits on the defendant and for substituted service. It is now common ground that leave to serve out of Australia was not required. That is because it would appear that the proceeding comes within the type of proceedings that can be served on defendants outside Australia without leave on one or more of the grounds that the proceeding:

(1)    arises under a law of the Commonwealth (Pt 5.7 of the Corporations Act) and that law expressly confers jurisdiction on the Court over persons outside Australia (through the definition of a Part 5.7 body and s 1337B of the Corporations Act): r 10.42(j)(iv);

(2)    relates to the construction, effect and enforcement of a law of the Commonwealth, being Pt 5.7 of the Corporations Act, including the meaning of a Part 5.7 body and the circumstances in which such a body should be wound up: r 10.42(p); and

(3)    includes recognition of a foreign judgment: r 10.42(m).

6    By amended interlocutory application, the defendant applied for orders:

(1)    under r 13.01(1)(d), discharging the orders of Markovic J granting leave to serve outside of Australia and for substituted service;

(2)    alternatively, under r 13.01(1)(b), setting aside the orders of Markovic J granting leave to serve outside of Australia and for substituted service;

(3)    under r 13.01(1)(a), setting aside the plaintiff’s amended originating process; and

(4)    alternatively, dismissing the amended originating process or staying the proceeding pursuant to the inherent power of the Court and/or r 10.43A(1).

7    The defendant’s written submissions address only (3) and (4) immediately above. Senior counsel for the defendant formally withdrew the prayers for relief in (1) and (2) above on the hearing of the application. It is convenient to deal with (3) and (4), the only remaining prayers for relief, in turn.

Set aside for want of jurisdiction

8    Rule 13.01(1)(a) provides that a respondent may apply to the court for an order “setting aside an originating application”. The defendant seeks to do so on the basis that the Court lacks jurisdiction in the proceeding because the defendant is not a Part 5.7 body. That submission is advanced on the basis that the defendant does not, nor did it, carry on business in Australia.

9    It is common ground that if the requirement that the defendant be a Part 5.7 body is a true jurisdictional requirement, as opposed to merely a matter on which the Court must be satisfied before the power to wind up the defendant under s 583 of the Act can be exercised, it must be established on a final basis on a balance of probabilities. The defendant submits that that it is a jurisdictional requirement, whereas the plaintiff submits that it is not.

10    It is also common ground that if on this purely legal point the defendant is correct, then the interlocutory application must be stood over for determination following a hearing on the factual question of whether the defendant is a Part 5.7 body. That would be so that the factual question can be determined on a balance of probabilities which may require compulsory processes of discovery and the like as well as cross-examination of witnesses. If, however, the plaintiff is right then relief under r 13.01(1)(a) must be dismissed. That is because the defendant accepts that the plaintiff has done enough by way of evidence at this stage to establish at least an arguable case.

11    The plaintiff’s submission is correct and the defendant’s is incorrect on this point. The law recognises the distinction between “jurisdiction as the authority to decide the range of matters that can be litigated before a court, contrasting it with the powers that can be exercised in deciding such matters (the broader, general sense of jurisdiction)”: Rizeq v Western Australia [2017] HCA 23; 262 CLR 1 at [128] per Edelman J citing Harris v Caladine [1991] HCA 9; 172 CLR 84 at 136 per Toohey J. That distinction is well-recognised: Osland v Secretary, Department of Justice (No 2) [2010] HCA 24; 241 CLR 320 at [19] fn 49 and the authorities collected there.

12    The usage of “jurisdiction” to mean “enlivened power” is an example of what Justice Leeming has described as the “metonymous use” of the former term: see Leeming M, Authority to Decide: The Law of Jurisdiction in Australia (2nd ed, Federation Press, 2020) at 10-12. Other such uses were recently mentioned in Zurich Insurance Co Ltd v Koper [2023] HCA 25; 277 CLR 164 at [48] per Gordon, Edelman and Steward JJ: “[F]or a court to have authority to decide a matter, there must be a subject matter dimension of jurisdiction (the exercise of judicial power which resolves a justiciable controversy of a kind within the court’s limits), a territorial dimension of jurisdiction (the territory over which the court’s power extends) and a personal dimension of jurisdiction (the persons bound by the exercise of that judicial power and who are amenable to its exercise).”

13    In the present case there is subject matter jurisdiction because the claim for relief under s 583 of the Corporations Act is a claim “with respect to civil matters arising under the Corporations legislation” as conferred by s 1337B(1) of the Corporations Act. It is also a matter arising under a law of the Parliament with the result that this Court has subject matter jurisdiction under s 39B(1A)(c) of the Judiciary Act 1903 (Cth). There is territorial jurisdiction because the power that the Court is asked to exercise, if enlivened, is a power to be exercised within Australia and there is personal jurisdiction because the defendant was properly served.

14    The requirement that the defendant be a Part 5.7 body before it can be wound up under s 583 is a prerequisite to the exercise by the Court of the jurisdiction that it otherwise has, ie the Court must be satisfied that that requirement is met before it can exercise the power of winding up, but it is not required to be satisfied of that matter in order to have jurisdiction in the proceeding.

15    That the Pt 5.7 question is not one going to the Court’s jurisdiction is clear from Tiger Yacht Management Ltd v Morris [2019] FCAFC 8; 268 FCR 548 at [68] per McKerracher, Derrington and Colvin JJ – the Court held that it was not necessary for it to “form a final view on the issue whether [the relevant company] was carrying on business in Australia” and that it “was sufficient if the cause of action alleged was based on a claim that [the relevant company] was carrying on business in Australia (which it was) and that there was a prima facie case to support that position (which there was).” It does not matter that that case was not about r 13.01(1)(a) but about r 13.01(1)(d) because the Court was in any event required to be satisfied that it had jurisdiction. It was apparently so satisfied, and that was on the basis that the Part 5.7 body question had to be established only to a prima facie standard.

16    The present situation is analogous to that in Bray v F Hoffmann-La Roche Ltd [2003] FCAFC 153; 130 FCR 317. In much the same way as s 1337B(1) of the Corporations Act in the present case, s 86(1) of the Trade Practices Act 1974 (Cth) (TPA) as it then was gave subject matter jurisdiction to the Federal Court for a proceeding in which a contravention of s 45 of that Act was alleged. A requirement for relief in respect of a foreign corporation was that it carried on business in Australia as prescribed by s 5(1). It was held by the Full Court that that requirement was not a true jurisdictional requirement, but rather a requisite for the exercise of the power, with the result that it had to be established only on a prima facie basis and the jurisdictional challenges of the foreign corporations failed: [29]-[31] per Carr J, [169]-[170] per Branson J and [237]-[238] per Finkelstein J.

17    The defendant places reliance on R v Federal Court of Australia; Ex parte Western Australian National Football League (Inc) [1979] HCA 6; 143 CLR 190, in particular at 215 where Gibbs J held that the question whether a person whose conduct was said to be regulated by s 45 of the TPA is a trading corporation “is a condition of the jurisdiction of the Federal Court” which is “a jurisdictional, preliminary or collateral fact”. However, that was in the context of a constitutional challenge as to whether the relevant body was a trading corporation within s 51(xx) of the Constitution. No such constitutional “hard boundary” (to use the expression used by Senior Counsel for the plaintiff) of jurisdiction arises in the present case. The reasoning in that case is accordingly inapplicable in the present case.

18    The defendant also relies on Australian Securities and Investments Commission v Edwards [2004] QSC 344; 22 ACLC 1,469. Justice McMurdo (at [41]) explained that once a registrable body that is a foreign company becomes a Part 5.7 body it is “thereafter susceptible to an order for winding up ... Once it becomes a Part 5.7 body it has effectively submitted to the jurisdiction conferred by the Act for its winding up.” The defendant submits that that demonstrates that the Part 5.7 body requirement is a jurisdictional requirement. However, that is not how I understand his Honour. At the end of the sentence just quoted is footnote 7 (inconveniently, endnote 7 in the ACLC report). That cites Harmer RW, “Report for Australia” in Fletcher IF (ed), Cross-Border Insolvency: Comparative Dimensions (United Kingdom National Committee of Comparative Law, 1990) at 46 as quoted in Keay A, McPherson: The Law of Company Liquidation (4th ed, LBC Information Services, 1999) at 688. Harmer (who notably was the Commissioner-in-charge of the Law Reform Commission inquiry into general insolvency from 1983, culminating in the 1988 Harmer Report) is quoted as having said the following:

the jurisdiction appears to attach from the point in time that the requirement first arises (for registration) and thus such a company continues to be amenable to an application to wind up under the legislation. It might be said that the company has “submitted” to the jurisdiction as a result of “carrying on business”.

19    That illustrates the underlying rationale to the provision that allows for the winding up of a foreign company that carries on business in Australia, but it does not offer support for the proposition that “carrying on business” is a true jurisdictional requirement that must be established before the court can further entertain a proceeding for winding up.

20    Justice McMurdo (at [43]) explained that “[o]nce it is determined that a foreign company is a [Part 5.7 body], there is jurisdiction to order its winding up upon proof of a relevant ground” and that matters such as the presence or otherwise of assets or creditors within the jurisdiction are relevant considerations to the exercise of the discretion to order winding up, “but they do not go to jurisdiction.” I understand his Honour to be using the word “jurisdiction” here in the sense of “power”. One of the authorities cited by his Honour is Re Norfolk Island Shipping Line Pty Ltd (1988) 6 ACLC 990, a pre-Corporations Act decision under the Companies (New South Wales) Code 1981 (NSW). There, Young J (at 991) explained that the question of whether a Norfolk Island incorporated company carried on business in New South Wales was possibly one for decision on the facts available at the final hearing. However, at the time of the summons before his Honour, there were sufficient facts before the Court to show that the company may have been carrying on “more than isolated transactions” for pecuniary gain in the state. Having concluded “at least for assuring myself I have jurisdiction” that the company was carrying on business in the state, Young J then considered whether it would be appropriate to wind up the company. The decision illustrates that the question of whether a company was the then-equivalent of a Part 5.7 body was not required to be finally determined as an antecedent jurisdictional requirement.

21    Finally, the defendant refers to Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd [2005] NSWSC 544; 190 FLR 209. The New South Wales Supreme Court had appointed a provisional liquidator of the relevant company which was incorporated abroad. Such an order required that the foreign company be a Part 5.7 body. An application was brought by some interested parties to set aside the order appointing a provisional liquidator. Although Barrett J described the challenge on the basis that the company was not a Part 5.7 body as a “jurisdictional challenge” (eg at [9]), his Honour did so in the sense that that was an issue that had to be decided before the power was enlivened. That much is apparent from his Honour saying, with reference to the earlier appointment of the provisional liquidator, that “[i]mplicit in the exercise of jurisdiction under the Corporations Act in that way on 9 December 2004 was a finding that [the company] is a ‘Part 5.7 body’” (at [9]). It is also apparent in his Honour’s use of the phraseology of the “jurisdiction under s 583 [being] exercisable” (at [17]). See also at [23]. In the result, Gebo is not authority in favour of the defendant’s position.

22    The defendant’s prayer for relief with reference to r 13.01(1)(a) must accordingly fail.

Summary dismissal or stay – (clearly) inappropriate forum

23    The defendant relies on the Court’s inherent power and r 10.43A. The latter is, relevantly, in the following terms:

10.43A     Court’s discretion whether to exercise jurisdiction

(1)     On application by a person on whom an originating application has been served outside Australia, the Court may dismiss or stay the proceeding or set aside service of the originating application.

(2)     Without limiting subrule (1), the Court may make an order under this rule if satisfied that:

(a)     ...; or

(b)     Australia is an inappropriate forum for the proceeding; or ...

24    The defendant rightly accepts that the applicable standard for the establishment of “inappropriate forum for the proceeding” is effectively the same as the “clearly inappropriate forum” standard established in Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; 171 CLR 538. In Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10; 210 CLR 491, although it was recognised that “inappropriate forum” is less emphatic than “clearly inappropriate forum” (at [24]), it was held that “the same concepts and considerations necessarily inform” both tests, and that they inform “the ultimate consideration [of] prevention of injustice” in the same way (at [25]).

25    In Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; 165 CLR 197, and confirmed in Voth, it was decided not to follow the English approach as set out in the speech of Lord Goff of Chieveley in the House of Lords in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 477-478 – ie that the domestic proceeding will be stayed if it is shown that the domestic forum is not the natural or appropriate forum for the trial, and also that there is another available forum which is clearly or distinctly more appropriate than the domestic forum, where the “natural forum” is “that with which the action had the most real and substantial connection” (Voth at 548-549). It was nevertheless held in Voth (at 564-565) that the discussion by Lord Goff of the relevant “connecting factors” and “a legitimate personal or juridical advantage” provides valuable assistance.

26    In Voth, it was also said (at 566) that:

the extent to which the law of the forum is applicable in resolving the rights and liabilities of the parties is a material consideration … the selected forum should not be seen as an inappropriate forum if it is fairly arguable that the substantive law of the forum is applicable in the determination of the rights and liabilities of the parties.

27    The majority (at 566) agreed with Gaudron J in Oceanic Sun Line that “the substantive law of the forum is a very significant factor in the exercise of the court’s discretion, but the court should not focus upon that factor to the exclusion of all others.”

28    The defendant’s application for a stay of the proceeding on “inappropriate forum” grounds proceeds on the premise that the Court has jurisdiction in the matter. Thus, the law to be applied is, and can only be, Australian law, namely the relevant provisions of the Corporations Act. Moreover, the available relief under the Corporations Act is not available in any other jurisdiction. It is true that similar relief may be available elsewhere, including in China where the defendant’s centre of main interest apparently is, but that relief will not be available in China in relation to assets in Australia. The powers of a liquidator which the plaintiff seeks to ultimately have exercised for the purpose of satisfying its judgment, including to unwind transactions in Australia and pursue voidable transaction or other similar claims, cannot be exercised by a liquidator appointed in China unless a further step is first taken. That step would be the recognition of the Chinese proceeding in Australia under the Cross-Border Insolvency Act 2008 (Cth) and the UNCITRAL Model Law on Cross Border Insolvency. That is another whole process. That not only shows that this Court is not a clearly inappropriate forum – it goes so far as to show that China is not the most appropriate or natural forum.

29    Moreover, in the proceeding for the winding up of the defendant under s 583 the overwhelming weight of connecting factors is to Australia. The key question will be whether the defendant carries (or carried) on business in Australia. That is inevitably an Australian-centred inquiry. The evidence is likely to be in Australia, as well as the witnesses. As apparent from the preceding discussion of Part 5.7 bodies, the proceeding will require the interpretation and application of Australian law. The subject matter of the dispute has therefore more than a “tenuous connection” with Australia: cf Garsec v His Majesty the Sultan of Brunei [2008] NSWCA 211; 250 ALR 682 at [141] per Campbell JA, Spigelman CJ and Hodgson JA agreeing. The facts that the corporations are both foreign corporations, that the debt is on a foreign judgment and that there are enforcement proceedings elsewhere in the world do not materially detract from that analysis.

30    Further, there is no parallel or duplicative proceeding in another jurisdiction, so the proceeding is not “vexatious or oppressive” in the sense that it is “productive of serious and unjustified trouble and harassment” or “seriously and unfairly burdensome, prejudicial or damaging” in the sense discussed in Henry v Henry [1996] HCA 51; 185 CLR 571 at 587 quoting Oceanic Sun Line at 247 per Deane J.

31    In those circumstances, I am not persuaded that this Court is an inappropriate forum for the proceeding within the meaning of r 10.43A(2)(b).

Conclusion

32    In the result, the defendant’s amended interlocutory application dated 4 July 2025 must be dismissed. There does not appear to be any reason why the costs should not follow the result.

33    The matter will otherwise be listed for further case management.

Associate:

Dated:    28 July 2025