In Li v Yang [2025] NSWSC 904, the New South Wales Supreme Court refused to strike out cross-claims brought by Ms Yang, despite earlier judgments on related matters having been made in China. The claimant, Ms Li, argued that the foreign proceedings had already determined the relevant issues, and that the matter had reached finality. However, Richmond J refused to strike out Ms Yang’s cross-claims. The Court considered the limits of foreign judgments as estoppel, and the principle of forum non conveniens.
Background
This case relates to a dispute about testamentary wills made by Mr Yang, and the distribution of property under those wills. Mr Yang had assets in China and in Australia. He had made two wills; one concerning property located only in China (China Will), and the other concerning property located only in Australia (Australia Will).
Ms Yang, the claimant, was Mr Yang’s daughter from his first marriage to his late first wife. Ms Li was Mr Yang’s second wife, to whom he remained married until his death. Ms Li and Mr Yang had a son, Harold, who was under the age of 18 at the time the case was heard.
Under the China Will, Ms Yang was the only beneficiary. Under the Australia Will, both Ms Yang and Ms Li were beneficiaries of the only asset – a property in Sydney’s Haymarket (Haymarket Property) – in the proportions: Ms Li 40% and Ms Yang 60%.
Mr Yang had around 15 properties and a parcel of land (Land) in China. During his lifetime, he transferred four of those properties to Ms Yang. Under the China Will, Mr Yang left the Land and seven properties to Ms Yang. The remaining four properties, together with an account of stocks (Undistributed Property), neither of which had been transferred by him during his lifetime, became the subject of a court dispute in China between Ms Li and Ms Yang.
Before the death of Mr Yang, Mr Yang, Ms Li and Ms Yang had a meeting to discuss financial matters and future plans. In this case, Ms Yang alleged that at this meeting, Ms Li gave an undertaking to Mr Yang and Ms Yang to manage Mr Yang’s estate and its income and to use this resource to pay Ms Yang’s tuition fees.
After Mr Yang’s death, Ms Li arranged in China for Ms Yang to sign a loan agreement between Ms Li as lender and Ms Yang as borrower, together with a mortgage over a Chinese property (Loan Agreement) in favour of Ms Li. Ms Li transferred RMB 380,000 (approximately AUD $76,000), (Loan Advance) to Ms Yang purportedly under the Loan Agreement.
Ms Li managed the financial affairs of the Chinese properties, and the rental income generated from those properties (Rental Income) was retained by Ms Li.
Chinese Judgments
There were two Chinese judgments:
- The first Chinese judgment (CJ1) concerned the repayment of the Loan Advance plus interest. In this Chinese proceeding, Ms Yang alleged that there was no loan agreement between herself and Ms Li and that the purpose of the Loan Agreement was to make a tenant vacate the house which was used as security under the Loan Agreement. It was further alleged that the transfer of the Loan Advance was for the payment of Ms Yang’s tuition and living expenses. The Chinese Court ordered Ms Yang to repay the Loan Advance plus interest to Ms Li, without investigating the source of the Loan Advance transferred by Ms Li.
- The second Chinese judgment (CJ2) concerned the validity of Mr Yang’s China Will. Ms Li provided evidence to the Chinese Court that Mr Yang had previously, before his death, decided that Ms Li was to manage and use the Rental Income for herself. The Chinese Court referred to the evidence provided by Ms Li and did not support Ms Yang’s claim for a share of the Rental Income.
The Australian Dispute
Later, Ms Li started a claim in the NSW Supreme Court alleging that Ms Yang had orally agreed to transfer to Ms Li her 60% interest in the Haymarket Property in return for Ms Li paying Ms Yang’s tuition fees (Australian Dispute).
In the Australian Dispute, Ms Yang brought three cross-claims. Relevantly, for the purpose of this article:
- In the first cross-claim (Claim 1), Ms Yang alleged that Ms Li undertook to manage Ms Yang’s financial affairs in her interests, and this gave rise to a fiduciary relationship between Ms Yang and Ms Li, and an obligation on Ms Li to account for her management of those properties.
- In the second cross-claim (Claim 2), Ms Yang sought to set aside the Loan Agreement, alleging that it was entered into under undue influence and unconscionable conduct. Ms Yang alleged that the Loan Advance was transferred from the Rental Income rather than Ms Li’s own funds.
Ms Li sought to strike out Ms Yang’s cross-claims by relying on these two Chinese judgments because:
- CJ1 had already adjudicated the Loan Agreement dispute, and Ms Yang had already satisfied the order made by the Chinese Court in this respect. Ms Li argued that repayment of the Loan Agreement under CJ1 was an acknowledgement that issues related to the Loan Agreement had been adjudicated and reached finality. The Court should not allow Ms Yang to re-litigate.
- CJ2 had already determined entitlement to the rental income.
In supporting her claim, issues of the rule of Anshun estoppel, cause of action estoppel, issue estoppel and forum non conveniens were raised.
The Supreme Court Decision
Limits of Foreign Judgment as Estoppel
Anshun Estoppel
To establish Anshun estoppel, it must be shown that the claim or issue raised in later Australian proceedings was so closely connected with the subject matter of earlier proceedings that it was unreasonable not to have raised it in earlier proceedings. When there is a foreign judgment, satisfying the requirements is particularly challenging. If this test is satisfied, the Court will strike out a claim.
Where the foreign system is not a common law jurisdiction — such as the legal system in China — it cannot be assumed that doctrines equivalent to Australian equitable doctrines and remedies (e.g. fiduciary duties, undue influence, constructive trust) exist or could have been raised in the foreign proceedings. The party seeking to rely on Anshun estoppel bears the burden of adducing detailed expert evidence on foreign law to establish both that (i) the claim could and should have been raised in the foreign court, and (ii) the foreign law recognises an equivalent estoppel principle.
In Li v Yang, Ms Li failed to discharge this burden. There was no expert evidence demonstrating that Chinese law would have permitted the equitable claims now raised in the New South Wales proceedings. Therefore, the Court declined to apply Anshun estoppel.
Cause of Action Estoppel: Finality and Identity of Claim
A foreign judgment will only give rise to cause of action estoppel in Australia if expert evidence proves that the judgment is final and conclusive on the merits under the foreign legal system. In Li v Yang, there was no evidence that CJ2 was a final judgment. Additionally, mere factual overlap is insufficient to establish a cause of action estoppel. It requires that the right or obligation asserted must be identical in substance to those previously adjudicated. If these requirements are met, the Court is likely to strike out a claim.
Although CJ1 and Claim 2 both related to the same Loan Agreement, the causes of action were not identical. CJ1 concerned the enforcement of a debt arising under the Loan Agreement, whereas Claim 2 challenged the validity of that agreement. This distinction led the Court to deny the application of cause of action estoppel.
Issue Estoppel: Same Issue, Same Party and Final Judgment
Richmond J reaffirmed that, under the Voth test, an Australian court will only decline jurisdiction if it is satisfied that it is a clearly inappropriate forum. The burden lies on the party seeking the stay to prove this. In Li v Yang, the Court held that Australia was not a clearly inappropriate forum because the dealings giving rise to the alleged fiduciary duties occurred in Australia, the defendant resided there, and both parties were available to give evidence there. Importantly, there was no evidence that equivalent equitable relief (such as fiduciary duties and equitable remedies) was available in the Chinese legal system. These factors led the Court to retain jurisdiction despite some overlap with the Chinese proceedings.
Outcome
The Court allowed Ms Yang’s cross-claims to be submitted. The Chinese judgments did not constitute any estoppel. The Court retained jurisdiction, being satisfied that Australia was not a clearly inappropriate forum.
Key Takeaways
- Foreign judgment and estoppel: A foreign judgment can strike out a claim if the requirements of Anshun estoppel, cause of action estoppel, or issue estoppel are met. Expert evidence proving that the foreign judgment is final and conclusive, and that the claim or issue in the Australian proceedings is identical in substance to those in foreign judgments, rather than mere factual overlap, is critical to establish estoppel.
- Forum non conveniens: The Court will only decline jurisdiction if Australia is a clearly inappropriate forum. Strong local connections, particularly where equitable remedies may not be available overseas, will incline the Court to retain jurisdiction.
This decision reinforces the importance of strategic litigation planning in cross-border matters. Parties should carefully consider whether an issue, despite being finally determined in their home jurisdiction, may still be re-litigated in Australia. Proactive planning is essential to avoid future legal uncertainty, including potentially broadening the scope of the facts and law to be litigated in the original foreign proceeding.
Further Information
For more information about cross-border disputes and the implications of foreign judgments in Australian courts, please contact the authors of this article:
