Singapore Court Enforces China Ruling in Landmark Judgment

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1 Singapore Court Enforces China Ruling in Landmark Judgment Introduction The Singapore High Court has issued a landmark judgment in what is believed to be the first instance of enforcement of a judgment from the People s Republic of China ( PRC ). We reported on the decision earlier in August 2013, and the Client Update can be accessed here. However, with the release of the written judgment in January 2014, this report further highlights the salient features of the decision and its implications for foreign judgments in the future. In Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2014] SGHC 16, the Plaintiff had obtained an award from the Suzhou Intermediate Court ( PRC Court )against the Defendant for, inter alia, recovery of the purchase price paid by the Plaintiff to the Defendant (the PRC Judgment ). The Plaintiff then sought to enforce this award in Singapore. The Singapore High Court recognised that the case raised novel issues as to the enforcement of foreign judgments, but eventually held in favour of the Plaintiff. The Court found that the PRC Judgment was capable of both recognition and enforcement in Singapore, and ordered the payment of all sums in the PRC Judgment. The Plaintiff was successfully represented in this matter by Rebecca Chew, Paul Tan, and Lim Huay Ching of Rajah & Tann LLP. Brief Facts The Plaintiff had entered into a contract with the Defendant for the supply of two generator sets. The Defendant is a wholly-owned subsidiary within the Aksa group of companies headquartered in Turkey. The Plaintiff found that the sets were neither new nor manufactured in England as agreed and were not capable of use, and thus began proceedings against the Defendant in the PRC Court. The PRC proceedings began in 2005, but were withdrawn in 2007 for out-of-court negotiations. After the failure of these negotiations, proceedings were re-commenced in In both proceedings, the Plaintiff sued the Defendant and another PRC company called Shanghai Yates that had signed on the sale contract as guarantor. The PRC Court held in favour of the Plaintiff in their claim against the Defendant but dismissed the Defendant s claim against Shanghai Yates. The PRC Court ordered the 1 Rajah & Tann LLP

2 return of the two generator sets and for the Defendant to pay the Plaintiff judgment sums of US$190,000 and RMB7,088. The Defendant failed to comply with the PRC Judgment. As a result, the Plaintiff sought to enforce the PRC Judgment in Singapore. Holding of the High Court The issue before the Singapore High Court was whether the PRC Judgment was capable of recognition and enforcement in Singapore. As the issues raised had not been encountered in local case law, the Court had to analyse the underlying principles, and eventually ordered the enforcement of the PRC Judgment against the Defendant. Recognition A foreign judgment is capable of recognition at common law if (i) it is final and conclusive, (ii) the Court issuing the judgment had international jurisdiction, and (iii) there is no defence to the recognition of the judgment. First, the High Court had to consider whether the PRC Court had international jurisdiction over the Defendant. In deciding this issue, the High Court had to consider the following issues:- (a) (b) (c) Whether the Defendant had voluntarily submitted to the PRC Court at the relevant time. Whether the Defendant was present in the PRC at the time of the PRC proceedings. If (a) and (b) above were both answered in the negative then, in the alternative, whether Shanghai Yates could be considered the Defendant s privy for the purposes of binding the Defendant to the PRC Judgment. If the High Court found in favour of the Plaintiff under either of the issues raised in (a) or (b) above, then there would be no necessity to consider issue (c). The Plaintiff need only establish its position under either (a) or (b) to satisfy the High Court that the PRC Court has international jurisdiction over the Defendant. Although the Plaintiff s counsels adduced evidence on all three issues and made legal submissions on all three issues, the High Court found in favour of the Plaintiff on issue (a) and held that the PRC Court did in fact have international jurisdiction. The High Court did not set out in its Judgment their decision on issues (b) and (c). On the issue of voluntary submission, evidence was adduced that while the Defendant had entered a defence in the 2005 PRC proceedings, thus voluntarily submitting itself to the PRC Court s jurisdiction, it ignored the PRC proceedings when they were recommenced in The Defendant argued that the relevant proceeding which the High Court should be concerned with was the 2008 PRC proceedings which resulted in the PRC Judgment. After all, the 2005 PRC proceedings were 2 Rajah & Tann LLP

3 withdrawn by the Plaintiff. Nonetheless, the High Court found that the consent to the jurisdiction in the 2005 PRC proceedings should be imputed to the Defendant in the 2008 PRC proceedings as well. The High Court took into account the fact that the two sets of PRC proceedings had the same parties and claims before the same PRC Court, and were indistinguishable. Further, it was found that to decide otherwise would be allowing the Defendant to exploit a procedural technicality by ignoring the 2008 PRC proceedings on legal advice that a judgment awarded under such circumstances would be unenforceable. This would be unfair to the Plaintiff. On the issue of presence, the Plaintiff s counsel adduced evidence largely through crossexamination of the Defendant s witnesses on their Aksa operations in the PRC at the time of the PRC proceedings. The intention of the line of cross-examination by the Plaintiff s counsel was to adduce evidence that the Defendant established and maintained at its own expense a fixed place of business of its own in the PRC and for more than a minimal period of time had carried on its own business at or from such premises by its servants or agents. The questions also sought to adduce evidence that the Defendant s representative had been carrying on the Defendant s business in the PRC at or from some fixed place of business. This was to establish that the Defendant was present in the PRC at the time of the PRC proceedings, and thus subjected to the jurisdiction of the PRC Court. The Plaintiff s counsel adduced evidence on the following issues to establish this point:- (a) (b) (c) Whether or not the fixed place of business from which the Defendant s representative operated was originally acquired for the purpose of enabling him to act on behalf of the Defendant in the PRC; Whether the Defendant had directly reimbursed the representative for (i) the cost of his accommodation at the fixed place of business, and (ii) the cost of his staff; What other contributions, if any, the Defendant made to the financing of the business carried on by the representative; (d) Whether the representative was remunerated by reference to transactions, e.g., by commission or by fixed regular payments or in some other way; (e) What degree of control the Defendant exercised over the running of the business conducted by the representative; (f) (g) Whether the representative reserved: (i) part of his accommodation, and (ii) part of his staff for conducting business related to the Defendant; Whether the representative displayed the Defendant s name at his premises or on his stationery, and if so, whether he did so in such a way as to indicate that he was representative of the Defendant; 3 Rajah & Tann LLP

4 (h) What business, if any, the representative transacted as principal exclusively on his own behalf; (i) (j) Whether the representative made contracts with customers or other third parties in the name of the Defendant or otherwise in such manner as to bind it; If so, whether the representative required specific authority in advance before binding the Defendant to contractual obligations. Given that many Singapore corporations have overseas offices, it is useful for corporations to be aware that their business operations in a foreign land may well be construed as the Singapore corporation having a presence in the foreign country for purpose of determining international jurisdiction of the foreign court over disputes concerning their local entity. However, the High Court decision did not cover the issue of presence as the Court found international jurisdiction when considering the issue of submission. Finally, there is also no clear landing on whether the High Court would be prepared to consider an alternative approach to determining the international jurisdiction of a foreign court. The Plaintiff s counsel advanced the argument before the High Court that in determining the issue of international jurisdiction, the High Court should also consider the approach adopted by the Canadian Supreme Court in that whether a foreign judgment should be enforced depended upon whether there was a real and substantial connection between the adjudicating forum and (i) the dispute, and (ii) the defendant against whom enforcement is sought. This issue was not decided by the High Court as there was no necessity to do so in this case. Enforcement With regard to enforcement, only foreign judgments for a definite sum of money are enforceable. The Defendant thus argued that the obligations in the PRC Judgment for the refund of monies and the return of the two generator sets could not be separated, and that the PRC Judgment could not be enforced as it was not a pure money judgment. Further, the two generator sets were still in the Plaintiff s possession at the time of the suit. The High Court rejected the Defendant s submission. It held that the Plaintiff was only required to allow for the collection of the two generator sets, and that the Defendant could not excuse itself of its payment obligations just because the Defendant had not made arrangements to pick them up. Further, where a foreign court orders the payment of a definite sum of money, this order would be capable of enforcement even if other orders were included in the judgment. As the PRC Judgment contained an obligation for the payment of a fixed sum, the Defendant s obligation to pay this sum was enforceable in Singapore. 4 Rajah & Tann LLP

5 Concluding Words This decision provides some guidance on the issue of enforcement of foreign judgments. As noted by the learned Justice Andrew Ang in the decision, the case raised novel issues as to when a foreign court is said to have international jurisdiction and how a foreign judgment is enforced by the Singapore courts. He also acknowledged the paucity of Singapore case law in this area and noted that there does not appear to have been an occasion when a Singapore court was required to deal with the same scope of issues relating to recognition and enforcement of a foreign judgment. However, there is still room for case law development in this area in particular on the issue of presence. Notwithstanding, this decision does provide some degree of clarity on how PRC Judgments are considered from the viewpoint of recognition and enforcement. This judgment also highlights the implications of participation in legal proceedings in the PRC and PRC awards, which may further apply to companies with a corporate presence in other foreign jurisdictions as well. Parties should be aware as to when such participation amounts to submitting to the foreign court s jurisdiction, and should be informed as to how to proceed when they wish to challenge the jurisdiction of the foreign court. 5 Rajah & Tann LLP

6 Contacts Rebecca Chew Partner D (65) F (65) rebecca.chew@rajahtann.com Paul Tan Partner D (65) F (65) paul.tan@rajahtann.com Lim Huay Ching Associate D (65) F (65) huay.ching.lim@rajahtann.com Please feel free to also contact the Knowledge and Risk Management Group at eoasis@rajahtann.com Rajah & Tann LLP is the largest law firm in Singapore and Southeast Asia, with regional offices in China, Lao PDR, Vietnam, Thailand and Myanmar, as well as associate and affiliate offices in Malaysia, Cambodia, Indonesia and the Middle East. Our Asian network also includes regional desks focused on Japan and South Asia. As the Singapore member firm of the Lex Mundi Network, we are able to offer access to excellent legal expertise in more than 100 countries. Rajah & Tann LLP is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealing with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The contents of this Update are owned by Rajah & Tann LLP and subject to copyright protection under the laws of Singapore and, through international treaties, other countries. No part of this Update may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann LLP. Please note also that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. It is to your advantage to seek legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann LLP or the Knowledge & Risk Management Group at eoasis@rajahtann.com. 6 Rajah & Tann LLP