When can the registration of a Mainland judgment be set aside?
Introduction
When can the registration of a Mainland judgment pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap.597) (the “Ordinance”) be set aside? In 中国民生信托有限公司 v 傅军 (FU KWAN) [2024] HKCFI 590, the Court of First Instance held that a Mainland judgment which merely stated that the defendant is liable to comply with his obligations under an execution certificate (執行證書), without expressly ordering the defendant to pay, is not registrable under the Ordinance.
Background
In 2019, the plaintiff advanced 4 loans to a company under 4 loan agreements (the “Loan Agreements”), which are guaranteed by the defendant under 4 guarantee agreements (the “Guarantee Agreements”).
Clause 12.2 of the Guarantee Agreements provides that:
“The guarantor undertakes that if the guarantor fails to perform or fully perform its obligations hereunder, it will voluntarily accept enforcement by judicial authorities without going through litigation procedures; the creditor may apply directly to a People’s Court with jurisdiction in accordance with Article 238 of the Civil Procedure Law for enforcement without going through litigation procedures, and the guarantor waives its right to defend against the creditor's direct application for enforcement.”
The borrower failed to repay the loans. In 2020, the Beijing Changan Notary Public Office, upon the plaintiff’s application, issued Certificates for Execution (執行證書) (the “Execution Certificates”), authorizing the plaintiff to apply to the relevant People’s Court with jurisdiction to enforce the Loan Agreements and the Guarantee Agreements.
Subsequently, the Beijing Court issued a Notice of Execution (執行通知書), under which the borrower and the defendant were ordered to comply with the obligations set out in the Execution Certificates immediately.
The parties later reached a settlement agreement, and hence the enforcement procedures were terminated.
In March 2020, the plaintiff applied to resume the enforcement procedures on the ground that the borrower and the defendant did not comply with the obligations set out in the settlement agreement.
In December 2020, the Beijing Court issued 4 rulings (the “Rulings”), which held that the borrower and the defendant are liable to comply with the obligations set out in the Loan Agreements and Guarantee Agreements (被執行人負有繼續向申請執行人履行債務的義務).
By 4 Ex Parte Originating Summonses filed in November 2022, the plaintiff applied to register the Rulings pursuant to the Ordinance.
The defendant applied to set aside the plaintiff’s registration of the Rulings pursuant to section 18 of the Ordinance.
The relevant statutory provisions
Section 5(2) of the Ordinance stipulates that:
“On an application made under subsection (1), the Court of First Instance shall order the Mainland judgment to be registered in accordance with this Ordinance if the judgment creditor has proved to the satisfaction of the Court of First Instance that the following requirements are satisfied—
(a) the judgment is given on or after the date of the commencement* of this Ordinance by—
(i) a chosen court which is a designated court;
(ii) a designated court upon a transfer of the case under the law of the Mainland from a chosen court;
…
(e) the judgment orders the payment of a sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty).”
To register a Mainland judgment in Hong Kong, the judgment creditor must prove to the Court’s satisfaction the elements set out in section 5(2) of the Ordinance.
The defendant’s grounds and the Court’s decision
The defendant relied on, among others, the following grounds of setting aside the plaintiff’s registration:
1. The “No Payment Order Ground”; and
2. The “No Choice of Mainland Court Agreement Ground”.
No Payment Order Ground
The defendant argued that the Rulings are not rulings which order the payment of a sum of money within the meaning of section 5(2)(e) of the Ordinance.
According to the defendant’s PRC law experts:
1. The statement in the Rulings (i.e. “被執行人負有繼續向申請執行人履行債務的義務”) merely describes the obligations of the defendant to the plaintiff. It does not have the effect of “demanding” the defendant to pay any sum of money to the plaintiff;
2. Unless and until the plaintiff applies for the resumption of the enforcement of the Execution Certificates and such an application is accepted by the Beijing Court, the plaintiff is not entitled to rely upon the Rulings to enforce against the defendant’s assets to satisfy his alleged indebtedness to the plaintiff. The Rulings are not monetary judgments which can be directly relied upon for enforcement purposes.”
The Court accepts the defendant’s submissions that, on a plain reading of the Rulings, there was no demand of payment against the defendant at all. The Rulings did no more than describing the continuing obligation on the part of the defendant to pay.
Hence, the Court held that the registration of the Rulings should be set aside based on this ground.
The No Choice of Mainland Court Agreement Ground
Although the Court set aside the registration of the Rulings based on the No Payment Order Ground, it also considered other grounds raised by the defendant for completeness.
Under section 5(2)(a) of the Ordinance, the judgment creditor should prove that the Mainland judgment it applies to register is given by a chosen court in Mainland (i.e. the Mainland court which the parties agreed for determining a dispute arising in connection with the contract to the exclusion of courts of other jurisdiction). The defendant claimed that as there was no choice of Mainland court agreement in relation to the Rulings, and hence the Rulings are not given by a chosen court in Mainland.
Clause 12.2 of the Guarantee Agreements set out that in the event the defendant did not perform his obligations under the Guarantee Agreements, the defendant would waive his right to contest the claim on the merits and the plaintiff could proceed directly to the court sanctioned execution stage, pursuant to Article 238 of the Mainland Civil Litigation Law.
The defendant argued that since there is no court chosen to “determine a dispute” arising out of the Guarantee Agreements, there is no “choice of Mainland court agreement” as such.
The Court held that the parties have expressly chosen the regime under Article 238, pursuant to which appropriate Mainland court(s) will handle their dispute on enforcement matters. This is the “choice of Mainland court agreement” made between the parties, and hence the requirement under section 5(2)(a) of the Ordinance is satisfied.
Hence, the Court rejected this ground of setting aside.
Key takeaways
This case illustrates that a Mainland judgment which does not expressly order a payment of a sum of money is not registrable under the Ordinance, even if it refers to an underlying execution certificate or notice of execution which sets out the payment obligation.
It shall also be noted that the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap 645) (the “New Regime”), which is the new regime on cross-border reciprocal enforcement of judgments, has come into effect on 29 January 2024. The new regime applies to judgments handed down on or after 29 January 2024.
Pursuant to section 10(b) of the New Regime, a judgment creditor who applies to register a Mainland Judgment must show that:
(i) the Judgment or part requires the payment of a sum of money, or the performance of an act, by a party to the original proceedings for the Judgment;
(ii) a default in complying with the requirement occurred within 2 years before the date of the application; and
(iii) the default has not been made good as at the date of the application.
Although the requirement of an exclusive jurisdiction clause under section 5(2)(a) of the Ordinance has been removed from the New Regime, a judgment creditor is still required to prove that the judgment to be registered contains an order for the payment of a sum of money or the performance of an act pursuant to section 10(b)(i) of the New Regime.
For more details of and our discussion on the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance, please click here.
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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors. |
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