Chinese creditors benefit from UK enforcement in new ruling

Alan Sheeley and Max Rossiter were commenting after the High Court in London recently ruled against the former chief financial officer of Chinese food ingredients chemicals business Wenda Co Ltd (Wenda). Wang Jinhong sought to prevent Wenda and its director Xiong We, from enforcing a Chinese award of more than $2 million against her in the UK. Their dispute concerns the valuation of a share transfer agreement executed in 2016.

Under the share transfer agreement, ownership of an English subsidiary that Wenda had incorporated, Syner Ltd, would transfer to Wang provided she paid Wenda an amount representing Syner's net equity value. Wang had relocated to the UK to run Syner and was the company’s sole director. The valuation was to be finalised by end of July 2017, but this did not happen. Despite this, in September 2017, Wang registered herself as the sole shareholder of Syner and did not pay Wenda any amount in return. The question of Wang’s entitlement to obtain the shares for free was litigated in China.

It was Wenda’s case that it had capitalised Syner with $2.2m in 2013. However, Wang disputed this. Wang claimed that she had loaned Syner $2.2m and simply agreed to convert that loan to equity when taking ownership of Syner’s shares. However, the Chinese courts ordered Wang to pay Wenda more than $2.1m. Wang lost an appeal and her subsequent attempts to obtain a retrial of the case were dismissed.

Wenda raised enforcement proceedings against Wang before the High Court of England and Wales in 2024. However, Wang raised two defence against enforcement. She argued that the ruling of the appeal court in China was not final and conclusive and that the proceedings leading to that Chinese judgment entailed breaches of natural justice.

Wang claimed that proceedings she had raised seeking a retrial of her case in China have not been concluded, meaning that the Chinese appeal court’s ruling should not be considered to be final and conclusive. The High Court rejected this defence.

In his ruling, Mr Andrew Hochhauser KC, sitting as a deputy High Court judge, said: “A foreign judgment is enforceable by action at common law, provided it was issued by a court with jurisdiction over the defendant and is not a judgment for a tax or penalty (which matters are not in issue here), and is final and conclusive... It is well established that a judgment can be ‘final and conclusive’ notwithstanding that it remains subject to an appeal. 

Wang also took issue with how the Chinese courts had considered evidence she had presented. In particular, she said Wenda had not provided the original agreement concerning the transfer of the Syner shares to the first instance court in China and that that court had further failed to consider evidence from auditors which she claimed support her case.

Mr Andrew Hochhauser KC said, however, that he was of “the firm conclusion that there has been no breach of natural justice by the Chinese courts” towards Wang in relation to the appeal court judgment in China that Wenda obtained. Among other reasons, he cited the fact that Wang had raised no complaint about not receiving a fair trial at the first instance court nor complained to the appeal court that she had not received a fair hearing.

The High Court’s ruling comes just months after it granted five Chinese creditors the right to enforce final judgments obtained in China against a couple who had relocated to the UK who had been ordered by the Chinese courts to pay the creditors more than £28m. 

Alan Sheeley, specialist in civil fraud and asset recovery at Pinsent Masons, said: “This judgment again shows that England remains an important jurisdiction in enforcing judgments globally and should be first on international litigants’ minds when looking to seek justice in an increasingly globalised world.”

Max Rossiter, also of Pinsent Masons, added: “As we see China continue to be integrated into the global economy, we are likely to see increasing interest from Chinese litigants in jurisdictions which recognise their judgments.”

Sheeley and Rossiter said the case demonstrates that the English courts continue to recognise foreign judgments and their enforceability. Recently, in the case of Valeriy Ernestovich Drelle v Servis-Terminal LLC, the UK Supreme Court held that an unrecognised and unregistrable foreign judgment may form the basis of a bankruptcy petition under section 267 of the Insolvency Act 1986.