Academics and a foreign lawyer give evidence in the High Court on the independence of China’s court system and whether a $22m judgment can be enforced against a man’s Auckland assets
A High Court judge had to determine the sensitive diplomatic issue of whether Chinese courts are actual courts whose judgments should be enforced in this country.
In a case in which a Chinese man with property assets in New Zealand, Deming Shi, was being pursued over a $22 million business payment there, Associate Judge Roger Bell of the High Court at Auckland said:
“As far as I am aware, this is the first case where it has been argued that in contemporary China there are no courts, as we understand them.”
In the end, after hearing evidence from law professors from Beijing and Hong Kong, and a former foreign lawyer representing clients in China, Judge Bell determined that the Hebei Higher People’s Court, which made the order against Shi “was part of the judicial branch of the government of the People’s Republic of China and was separate and distinct from legislative and administrative organs.
“It exercised a judicial function. There is no suggestion that the procedures or decision went awry because of any untoward outside influence.”
He found the company pursuing Shi over a debt for supplying coal for power generation, Hebei Huaneng, “has established a good, arguable case that is its suing on a judgment of a court”. The matter had first been heard at an intermediate people’s court in Hebei and then on appeal to the Higher People’s Court.
Hebei Huaneng can now go ahead and seek a summary judgment from the High Court here over the value of Shi’s property – an inner city apartment in Auckland and shares in property development company Boen Capital Co Ltd.
Hebei Huaneng had already obtained freezing orders over those New Zealand assets. Shi had tried to stop the action by arguing “China does not have true courts, and Hebei Huaneng should first enforce its securities in China”.
This case was to establish if the High Court should assume jurisdiction over someone who was served, outside New Zealand, an order of a Chinese court.
Judge Bell said there was no formal reciprocal enforcement of judgments between the two countries and Hebei Huaneng sued under the common law, which recognised a judgment of a foreign court as enforceable under our law if “the judgment is given by a court”, is final, for a set sum and under New Zealand jurisdiction rules such a matter could be examined.
“It does not matter whether the foreign jurisdiction recognises New Zealand judgments or not. Nor is the trading relationship between the two countries relevant. The same rules apply to a judgment from Chad or China.”
Shi’s argument to the High Court was “not just that the Higher People’s Court of Hebei Province is not a court, but that there are no courts in China, as that term is understood for proceedings to enforce judgments in New Zealand”.
He claimed that “while there are bodies in China called courts, they and their judges are not independent in the way required of a true court”.
Dr Zhang Wenliang, an associate professor of law in a law school in Beijing, gave evidence on the Chinese constitution and courts and their decision-making. He said there were four levels of court and within that system just one level of appeal. There were legal requirements for the appointment of judges and they were required to treat parties impartially. They were appointed by different levels of the Chinese people’s congress.
He said the two courts involved in Zhi’s case used collegial benches of judges. And Zhang said Chinese judgments were recognised in the common law in the US, Canada and Australia.
Another academic, Dr Ding Chunyan, an associate law professor in a law school in Hong Kong, explored the independence of Chinese courts. Judge Bell’s ruling says: “While the Constitution provides for people’s courts to exercise judicial power independently, she says that in practice Chinese courts are likely to be influenced by the people’s congress or its representatives, the Chinese Communist Party and administrative organs…..At the local level there can be interference from local government and the local Communist Party.”
A former lawyer who acted in China, Canadian Clive Ansley, told Judge Bell Chinese courts were not courts as he understood the term in jurisdictions that follow the rule of law. Cases were “routinely influenced by political matters… this is not ad hoc corruption or poor decision-making, but is how the system is designed to work”.
Ansley said judges were expected to decide whatever was in the interests of the Chinese Communist Party and judicial independence was considered an immoral Western concept.
He would call a Chinese court “a local administrative unit”.
Judge Bell said the witnesses’ evidence showed China had a separate branch of government which performed the judicial function, and while there might be a “different approach to maintaining good standards by judges… that does not by itself mean that they are not judges”.
He offered this “dictum of Cardozo J” in a US case named Loucks v Standard Oil: “We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home.”
Judge Bell said: “The courts have recognised and enforced judgments of courts of authoritarian regimes.”
He had to decide whether justice was done in Zhi’s case.
“Instead of saying that China does not have courts, the inquiry is whether the judgment debtor has any of the standard affirmative defences, including breach of natural justice.”
He found Shi took part in the Chinese proceeding, was represented, the case was in public, and there “is no suggestion the judgment of the Higher People’s Court was wrong on the merits”.
Judge Bell believed the Chinese court judgments’ style, after translation, might be unfamiliar to a common lawyer, but “they are unmistakably judicial decisions. They could have come from any commercial court anywhere in the world.”
It would be problematic if it were held that New Zealand should not recognise any decision of any Chinese court, the judge said, citing migration, family law and disputed titles to property.
Hebei Huaneng had a good arguable case that its judgment against Shi was an accrued liability. Because Shi’s assets were in New Zealand “that is a sufficient connection for an enforcement proceeding”… and “there is nothing else that counts against New Zealand assuming jurisdiction”.