Court File and Parties

Court File No.: CV-22-00688080-0000 Date: 2024-04-30 Ontario Superior Court of Justice

Re: Jie Zhang, Applicant -and- Fan Zhou also known as Pauline Zhou, Respondent

Before: Robert Centa J.

Counsel: Amiri Moses Dear, for the applicant Ran He, for the respondent

Heard: April 17, 2024

Endorsement

[1] This is an application by Jie Zhang to enforce orders from the Chinese courts against Fan Zhou, a resident of Ontario. For the reasons that follow, I grant the application.

Facts

[2] In 2019, Jie Zhang commenced an action for breach of contract against Fan Zhou in the Beijing Xiecheng District People’s Court. [1] Zhang sought an order requiring Zhou to pay to Zhang the repurchase price of RMB 13.3 million yuan, plus interest as set out in the agreement between the parties. There is no dispute that Zhou received actual notice of the proceeding and attorned to the jurisdiction of the Beijing court.

[3] The matter proceeded to trial before Judge Jian Song. Zhou was represented at court by a lawyer, Xiaohui Qi, who was listed as “agent ad litem.” Zhou appears to have filed a pleading (described as an “averment”) and provided evidence to the court. On December 7, 2020, the court delivered judgment in favour of Zhang. The Court awarded damages, interest, and costs in favour of Zhang. I will refer to this decision as the Beijing judgment.

[4] Zhou appealed the Beijing judgment to the Second Intermediate People’s Court of the Beijing Municipality. Zhou was again represented by a lawyer, this time Fengqian Li.

[5] On that appeal, Zhou asked the court of appeal to vacate the Beijing judgment and dismiss all of Zhang’s claims, to invalidate eight stock transfer contracts and revoke them by law, and to order Zhang to pay costs. Zhou also attempted to add an additional claim against Zhang. On March 31, 2021, the appeal court dismissed the appeal and rejected Zhou’s attempt to add an additional claim at the appeal stage because Zhang did not consent to Zhou adding a new claim and declined to mediate that new claim. The certified translation of the appeal judgment stated that:

Regarding Fan Zhou's new request of litigation in the second instance. Article 328 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China provides that: "During second- instance proceedings, if the plaintiff to the original proceeding adds an independent claim or the defendant to the original proceedings lodges a counterclaim, the people's court of the second instance may conduct mediation of the newly-added claim or the counterclaim if the parties concerned voluntarily agree to mediation, and shall inform the relevant parties to file a separate lawsuit if mediation fails. Where both parties agree that the people's court shall hear both the newly-added claim or counterclaim and the original case of the second instance, the people's court of the second instance may render a judgment/ruling thereon at the same time." In this case, Jie Zhang disagrees with mediation about Fan Zhou's request in the second, nor trial at the same time. Therefore, the Court will not accept Fan Zhou's request.

[6] In November 2022, over a year after the appeal court dismissed the appeal, Zhou commenced a new proceeding against Zhang in the Guangzhou Tianhe District Court. Zhou took the position that if she succeeded in the Guangzhou action, it would undermine “the root” of the Beijing judgment and might “have the effect of rendering the [Beijing] judgment moot.”

[7] On December 7, 2023, Judge Zhengyu Wang dismissed the Zhou action because it was a “repeat complaint” and a denial of the Beijing judgment. The court held:

In analysis of the above, as this case and the previous case involve the same facts, the same parties and the same subject matter, and the lawsuit claim in this case is essentially a denial of the judgment in the previous case, the lawsuit in this case filed by the applicant Fan ZHOU is a repeat complaint. According to articles 157(1)-(3) and 157(2) of the Civil Procedure Law of the People's Republic of China and article 247 of the Interpretation by the Supreme People's Court on the Applicability of the Interpretation of the Civil Procedure Law of the People's Republic of China, this court rules that:

The lawsuit of the applicant Fan ZHOU is hereby dismissed.

[8] Zhang’s application to recognize and enforce the Beijing judgment first came before me on January 9, 2024. The day before the hearing, Zhou delivered a supplementary affidavit indicating that she had filed an appeal of the Guangzhou judgment. At the hearing before me, the parties disagreed on the significance of the Guangzhou judgment and Zhou’s appeal to the application to recognize and enforce the Beijing judgment.

[9] I held that it was appropriate to adjourn the application to permit the appellate court to determine Zhou’s appeal of the Guangzhou judgment. On January 30, 2024, the Intermediate People’s Court of Guangzhou dismissed Zhou’s appeal of the Guangzhou judgment. Judge Jianwei Ye held as follows:

This court finds that the equity transfer contract dispute that is the subject in this lawsuit filed by Fan ZHOU is the same fact as what was tried in the previous civil judgment (2021)J02MZ4109, which involve the same parties and the same subject matter. The judgment in the previous case that both parties continue performing the contract has taken legal effect. For Fan ZHOU to file a lawsuit to this court and request dissolution of the contract is a repeat complaint and the ground of appeal is obviously invalid and not accepted by this court. This court dismisses the appeal, finds the court of first instance's ruling to dismiss the appeal to be correct, and upholds that ruling.

[10] Zhang filed a certified translation of the decision of the appeal court in Guangzhou with the court and I scheduled the application to be heard.

Legal Principles

[11] Justice Vermette recently summarized the legal principles applicable to the recognition and enforcement of foreign judgments. [2] I adopt her summary. Justice Vermette wrote:

The purpose of a proceeding to recognize and enforce a foreign judgment is to allow a pre-existing obligation to be fulfilled; that is, to ensure that a debt already owed by the defendant is paid. Such a proceeding is not based on the original claim the plaintiff pursued against the defendant, but, rather, on the obligation created by the foreign judgment. Barring exceptional concerns, a court’s focus when enforcing a foreign judgment is not on the substantive and procedural law on which the judgment is based, but instead on the obligation created by the judgment itself. Since the purpose of an action for recognition and enforcement is to assist in enforcing an already-adjudicated obligation and not to evaluate the underlying claim that gave rise to the original dispute, the enforcing court’s role is not one of substance, but one of facilitation. See Chevron Corp. v. Yaiguaje, 2015 SCC 42 at paras. 43-44.

Canadian courts have adopted a generous and liberal approach to the recognition and enforcement of foreign money judgments: see Chevron at para. 27. All the enforcing court needs is proof that the judgment: (1) was rendered by a court of competent jurisdiction; (2) is final; and (3) is for a definite sum of money: see Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52 at paras. 10-11. A foreign court will be found to have properly assumed jurisdiction where it had a real and substantial connection with the litigants or with the subject matter of the dispute, or where the traditional bases of jurisdiction were satisfied: see Chevron at para. 27 and Tracy v. Iran (Information and Security), 2017 ONCA 549 at para. 85.

Once the three elements set out above have been established, the burden shifts to the objecting party to establish the availability of a defence to the recognition of a foreign judgment: see Tracy at para. 87. The defences available are fraud, public policy and lack of natural justice: see Beals v. Saldanha, 2003 SCC 72 at para. 40.

The test that applies to a default judgment is the same than the test that applies to a judgment after trial: see Beals at para. 31.

In order to raise the defence of fraud, a defendant has the burden of demonstrating that the facts sought to be raised could not have been discovered by the exercise of due diligence prior to the obtaining of the foreign judgment: see Beals at para. 52.

The defence of lack of natural justice will apply where it is proved, to the civil standard, that the foreign proceedings were contrary to Canadian notions of fundamental justice. The domestic court must be satisfied that minimum standards of fairness have been applied to the defendant by the foreign court. A fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system. The defence of natural justice is restricted to the form of the foreign procedure, to due process, and does not relate to the merits of the case. Natural justice includes, but is not limited to, the necessity that a defendant be given adequate notice of the claim made against it and that it be granted an opportunity to defend. See Beals at paras. 59-60, 62, 64-65.

The defence of public policy has a narrow application and is not a remedy to be used lightly. It prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice. This defence turns on whether the foreign law is contrary to our view of basic morality. For example, it prohibits the enforcement of a foreign judgment that is founded on a law contrary to the fundamental morality of the Canadian legal system or that is rendered by a foreign court proven to be corrupt or biased. This defence does not extend to perceived injustices that do not offend our sense of morality. See Beals at paras. 71-72, 75.

It is appropriate to recognize and enforce the Beijing judgment

[12] I conclude that the Beijing judgment was rendered by a court of competent jurisdiction, is for a definite sum of money, and is final: Pro Swing, at paras. 10-11.

[13] First, I am satisfied that Zhang has proved that the Beijing judgment was rendered by a court of competent jurisdiction. Zhou accepts that she attorned to the jurisdiction of the Beijing court and, indeed, appeared through counsel at the hearing and appealed the decision.

[14] Second, Zhou accepts that the judgment is for a definite sum of money. I agree.

[15] Third, the Beijing judgment is now final. At the first hearing, Zhou took the position that the Beijing judgment was not final because of her outstanding appeal of the Guangzhou judgment. Indeed, that was the only ground Zhou advanced to resist enforcement of the Beijing judgment.

[16] Although I was not certain that the outstanding appeal of the Guangzhou judgment rendered the Beijing judgment (as confirmed on appeal) not final, I adjourned the hearing of this application to permit Zhou’s appeal of the Guangzhou judgment to be determined. As noted above, Zhou’s appeal of the Guangzhou judgment was dismissed on January 30, 2024. The decision of the Beijing court is now indisputably final.

[17] The burden now shifts to Zhou to establish the availability of a defence to the recognition of a foreign judgment. The defences available are fraud, public policy and lack of natural justice: Beals, at para. 40.

[18] Zhou’s factum did not raise any of the available defences. In oral argument, counsel made brief submissions suggesting that there was a lack of natural justice in the Beijing judgment because Zhou was not allowed to raise in the Beijing court all of the issues she wanted to raise.

[19] The defence of a lack of natural justice only applies where the foreign proceedings were contrary to Canadian notions of natural justice: Beals, at paras. 59-60, 62, 64-65. I find that Zhou has not proved on a balance of probabilities that the Beijing proceedings were contrary to Canadian notions of natural justice. Zhou received notice of the hearing, received the opportunity to participate in the hearing, participated in the hearing through counsel, filed a pleading, tendered evidence, and had a right of appeal, which she exercised. Zhou is clearly prepared to litigate in the Chinese court system, as she commenced the Guangzhou proceeding to try and assert her rights. Zhou led no evidence to prove a lack of judicial independence or fair ethical rules governing the Chinese courts. Based on my record before me, I find that Zhou has not made out the defence of a lack of natural justice.

Conclusion and Costs

[20] I grant the application and make an order:

a. recognizing the judgment of the Beijing Xicheng District People's Court in 2019, dated December 7, 2020, in matter number claim number (2019) JING 0102 MIN-CHU 44323# (the "Beijing Judgment") and directing that the Beijing Judgment be enforced as a judgment of the Ontario Superior Court of Justice; and

b. recognizing the judgment of the Second Intermediate People's Court of Beijing Municipality Civil Judgment, dated March 31, 2021, in matter number (2021) JING 02 MIN-ZHONG4109# (the "Appeal Decision") and directing that the Appeal Decision be enforced as a judgment of the Ontario Superior Court of Justice.

[21] I urge the parties to resolve the costs of this application. If the parties are not able to do so, Zhang may email his costs submission of no more than three double-spaced pages to my judicial assistant on or before May 8, 2024. Zhou may deliver her responding submission of no more than three double-spaced pages on or before May 15, 2024. No reply submissions are to be delivered without leave.

Robert Centa J. Date: April 30, 2024

Footnotes

[1] Claim number (2019) JING 0102 MIN-CHU 44323#. [2] Roger Vanden Berghe NV v. Merinos Carpet Inc., 2023 ONSC 6728, at paras. 49 to 55.