Judgment Stayed Pending Recognition in PRC

The judgment was entered in favour of the cross-claimant against the cross-defendant, but was stayed pending an approach to a court of competent jurisdiction in the PRC to discharge its order and pending application by the cross-claimant to have this Court's judgment recognised in the PRC. The court requested the PRC court to consider its reasons for entering judgment against the cross-defendant and whether its orders should now be discharged.

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY] v [COMPANY]; [COMPANY] v [COMPANY] (No 3) [2023] NSWSC 1596 Decision date: 15 December 2023 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Judgment entered in favour of cross-claimant against cross-defendant stayed until further order; parties to undertake further steps in respect of Civil Ruling Catchwords: PRIVATE INTERNATIONAL LAW – where judgment that cross-defendant pay cross-claimant $37 million under letter of credit issued by cross-defendant in the People's Republic of China – where cross-defendant enjoined by order of Court in the PRC from making payment under letter of credit – orders with extraterritorial effect – whether judgment should be stayed pending approach to a court of competent jurisdiction in the PRC to discharge its order and pending application by cross-claimant to have this Court's judgment recognised in the PRC – where respectful request made by this Court to a court of competent jurisdiction in the PRC to consider its reasons for entering judgment against the cross-defendant and whether its orders should now be discharged CIVIL PROCEDURE – interest to judgment – where judgment debtor enjoined by order of Court in PRC from paying the amount the subject of the judgment Cases Cited: [COMPANY] v [COMPANY]; [COMPANY] v [COMPANY] (No 2) [2023] NSWSC 1405 AES-3C Maritza East 1 [NAME] v [NAME] [COMPANY] (previously known as [COMPANY]) [2011] EWHC 123 (TCC) [NAME] v Compania Naviera Sota v Aznar [1920] 2 KB 287 Category: Consequential orders Parties: [COMPANY] (Plaintiff) [COMPANY] (First Defendant/Cross-Claimant) [NAME] (Second Defendant) [NAME] (Third Defendant) [COMPANY] (Fifth Defendant) [COMPANY] (Cross-Defendant) Representation: Counsel: [redacted] R G McHugh SC with R J May (First Defendant/Cross-Claimant, Second and Third Defendants) N J Owens SC with [NAME] SC (Cross-Defendant)

Solicitors: [redacted] [NAME] (First Defendant/Cross-Claimant, Second and Third Defendants) [NAME] (Cross-Defendant) File Number(s): 2021/220732

JUDGMENT 1. I published my principal judgment in this matter on 20 November 2023. [1] I shall use the same abbreviations here.

2. I invited submissions as to the further steps necessary to be taken in the proceedings.

3. I have received those submissions and have heard oral argument.

4. It was common ground that I should make the following orders and enter the following judgment:

1. Order that the plaintiff's claim be dismissed with costs.

2. Order that orders 7 to 14 of the orders made by Lindsay J on 2 August 2021 and extended on 13 August 2021 be discharged.

3. Judgment be entered against the cross-defendant in favour of the cross-claimant in the amount of AUD 37,000,000.

1. I did that on 14 December 2023.

2. There are three remaining questions.

Interest up to and from entry of judgment 1. [NAME] seeks interest at court rates on the $37,000,000 from 10 August 2021, being the date on which the [COMPANY] was obliged to dishonour the Letter of Credit, or pay. [2]

2. On 10 August 2021 the [COMPANY], or at least its [NAME], was constrained by the Civil Ruling from paying the amount of the Letter of Credit.

3. I have held that the [COMPANY] was not entitled to defer payment by reason of the "Transfer by operation of law" provisions in ISP98. [3]

4. But for the Civil Ruling and assuming, as I have found, that the [COMPANY] was not entitled to rely on the "transfer by operation of law" provisions in ISP98, the [COMPANY] would have paid the $37,000,000 to [NAME]'s advising [COMPANY].

5. The effect of the orders made by Lindsay J on 2 August 2021 was that [COMPANY] would have been restrained from dealing with such funds had it received them.

6. However, I think it reasonable to infer that, as [COMPANY] was [NAME]'s banker, the funds paid to [COMPANY] in this hypothetical circumstance would have been placed on interest bearing deposit.

7. In substance, [NAME] has been kept out of its money and the [COMPANY] has not yet been obliged to pay that money.

8. Although the [COMPANY], or at least the [NAME], remains bound by the Civil Ruling, now that judgment has been entered, interest should run on it from 10 August 2021.

9. I order that the cross defendant pay interest on the judgment entered against it on 14 December 2023 at Court rates from 10 August 2021.

Should the judgment be stayed? 1. [ADDRESS] will not enforce a contract where performance of the contract is forbidden by the law of place where it must be performed. [4]

2. The [COMPANY], or at least its [NAME], remains constrained by the Civil Ruling from making payment under the Letter of Credit.

3. The [COMPANY] submitted that the judgment should be stayed until the earlier of the discharge of the Civil Ruling or the recognition of this Court's judgment by a court of competent jurisdiction in the People's Republic of China.

4. The [COMPANY] pointed to the decision of Ramsey J in AES-3C Maritza East 1 [NAME] v [NAME] [COMPANY] (previously known as [COMPANY]). [5]

5. In that case, injunctions issued by the Tribunal de Commerce de Nanterre prevented payment under the bond in question, but were silent as to a payment that took a different form, for example payment pursuant to a judgment.

6. In those circumstances, Ramsey J concluded: "What the French injunctions do is to prevent Calyon from currently complying with their obligations under the Bond or that judgment. [NAME] [6] establishes is that the English court will not, in such circumstances, require Calyon to act in a manner which is illegal under French law because of the existence of the injunctions. The expectation would be that on the basis of this judgment, handed down by a court which has jurisdiction to determine liability under the Bond, the [ADDRESS] would discharge the injunction. That however is matter for the [ADDRESS]." [7]

1. The [COMPANY] should be encouraged to do what it can to draw this Court's decision to the attention of the [ADDRESS] and, now that the merits of the parties' competing contentions concerning the Letter of Credit have been determined in [NAME]'s favour, seek to have the Civil Ruling discharged.

2. The [COMPANY] is the "Third Party" named in the Civil Complaint and is bound by the Civil Ruling. Although in one sense it might be thought not to be in the [COMPANY]'s interest to seek to have the Civil Ruling discharged, it is my expectation, now that I have decided the case adversely to it, that it will do all that it can to achieve that result.

3. I am confident that this will be the [COMPANY]'s position.

4. It will be recalled that in March 2023, and independently of these proceedings, the [COMPANY] sought to have the Civil Ruling discharged. [8] 5. [NAME] has not yet been served with the Civil Complaint although [NAME], who appeared for [NAME] on 14 December 2023, stated that this would shortly occur. 6. [NAME] would be seen by the [ADDRESS] as having standing to make an application for the discharge of the Civil Ruling is by no means certain.

7. But what [NAME] can do is now to seek to have the judgment entered in its favour recognised in a court of competent jurisdiction in China.

8. In those circumstances, yesterday I ordered that the judgment against the [COMPANY] be stayed until further order.

9. I now make the following directions:

1. Direct that the parties notify my Associate by 1 March 2024 of such steps as have been taken in relation to the Civil Ruling and for the recognition of this Court's judgment in China and the outcome of those steps.

2. List the matter for directions before me at 9.30am on 8 March 2024 for the purpose of considering whether the stay on the judgment should be lifted.

1. I respectfully invite the Taiyuan Intermediate People's Court of Shanxi Province and, if appropriate, the Shanxi Higher People's Court, to consider this Court's reasoning for concluding that [NAME] is entitled to judgment against the [COMPANY] arising from the Letter of Credit, and to consider whether the Civil Ruling should be discharged, now that the parties' competing contentions concerning the Letter of Credit have been dealt with and determined by this Court.

Costs 1. The [COMPANY] wishes to make submissions as to the extent to which it should bear [NAME]'s costs of the proceedings in circumstances where, at hearing, [NAME] did not press a number of contentions that it had hitherto agitated. 2. [NAME] and the [COMPANY] will now agree a timetable for any evidence, and short submissions on that topic.

3. I will deal with that question on the papers, unless either party seeks a hearing.

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Endnotes 1. [COMPANY] v [COMPANY]; [COMPANY] v [COMPANY] (No 2) [2023] NSWSC 1405 ("Principal Judgment").

2. Principal Judgment at [165].

3. Principal Judgment at [176]-[239].

4. Principal Judgment at [254]-[255]. 5. [2011] EWHC 123 (TCC). 6. [NAME] v Compania Naviera Sota v Aznar [1920] 2 KB 287.

7. At [67].

8. Principal Judgment at [76]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2023