中国民生信托有限公司 v. FU KWAN

HCMP 1943/2022

[2024] HKCFI 590

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1943 OF 2022

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AND

HCMP 1944/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1944 OF 2022

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AND

HCMP 1945/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1945 OF 2022

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AND

HCMP 1946/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1946 OF 2022

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DECISION

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A.  INTRODUCTION

1.  These are the defendant’s applications made by summonses filed in the 4 actions herein on 31 March 2023 (“the Summonses”) pursuant to section 18 of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap.597, Laws of Hong Kong) (“the Ordinance”) to set aside the plaintiff’s registrations of 4 rulings dated 1 December 2020 (“the Rulings”) made by the Beijing Third Intermediate People’s Court (“the Beijing Court”).

B.  BACKGROUND

2.  On 4 April 2019, the plaintiff and 新華聯控股有限公司 (“the Borrower”) entered into 4 loan agreements (“the Loan Agreements”) pursuant to which the plaintiff agreed to advance the sums of RMB 110 million, RMB 120 million, RMB 110 million and RMB 100 million respectively to the Borrower.

3.  On the same day, the plaintiff and the defendant entered into 4 guarantee agreements (“the Guarantee Agreements”), pursuant to which the defendant agreed to guarantee the loans granted to the Borrower under the Loan Agreements.

4.  Clause 12.2 of the Guarantee Agreements provides that:

“保證人承諾：如保證人不履行或不完全履行其在本合同項下的義務時，自願接受司法機關的強制執行，而無需經過訴訟程序；債權人可根據《民事訴訟法》第二百三十八條規定，直接向有管轄權的人民法院申請強制執行，而無需經過訴訟程序，保證人放棄對債權人直接申請強制執行的抗辯權。”

5.  The Borrower failed to repay the loans under the Loan Agreements.

6.  On 13 January 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.

7.  On 14 January 2020, 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.

8.  Pursuant to rulings dated 20 January 2020, the enforcement procedures were terminated as the parties reached a settlement agreement.

9.  On 10 March 2020, the plaintiff applied to resume the enforcement procedures.

10.  On 1 December 2020, the Beijing Court issued the Rulings. The Ruling under (2020) 京03执恢46号之二 reads:

“[…]

  北京市長安公證處作出的(2019)京長安內經證字第14558號、14568號公證書及(2020)京長安執字第13號執行證書已經發生法律效力，中國民生信托有限公司據此申請强制執行，本院於2020年1月14日立案執行。2020年1月20日，中國民生信托有限公司以雙方達成執行和解需長期履行為由申請終結執行，本院於同日裁定終結執行。2020年3月10日，中國民生信托有限公司以被執行人未履行和解協議為由申請恢復執行，本院於3月12日立案執行，申請執行標的額為115 998 972.6元及利息。

[…]

  […] 經調查，被執行人名下銀行帳戶內無存款，無不動產及機動車登記信息，無可供執行的對外投資。[…] 申請執行人認可本院調查結果，同意終結本次執行程序。

  據此，依照《中華人民共和國民事訴訟法》第二百五十七條第六項及《最高人民法院關於適用（中華人民共和國民事訴訟法）的解釋》第五百一十九條之規定，本院裁定如下：

  終結北京市長安公證處作出的(2019)京長安內經證字第14558號、14568號公證書的本次執行程序。

  終結本次執行程序後，申請執行人享有要求被執行人繼續履行債務及依法向人民法院申請恢復執行的權利，被執行人負有繼續向申請執行人履行債務的義務。” (emphasis added)

11.  The above Ruling was issued in respect of the case under HCMP 1943/2022. The other 3 Rulings issued in relation to the cases under HCMP 1944 – 1946/2022 are identical in substance, save that the reference numbers of the enforcement procedures and the amount to be recovered are different[1].

12.  By 4 Ex Parte Originating Summonses filed on 25 November 2022, the plaintiff applied to register the Rulings pursuant to the Ordinance. Leave to register such Rulings was subsequently granted on 7 March 2023.

13.  As aforesaid, the defendant then took out the Summonses on 31 March 2023 and applied to set aside the said registrations.

C.  THE RELEVANT STATUTORY PROVISIONS

14.  A judgment creditor under a Mainland judgment may apply to the Court of First Instance within the time limit specified in section 7 of the Ordinance to have the judgment registered in the Court of First Instance: section 5(1) of the Ordinance. Pursuant to section 2 of the Ordinance, “Mainland judgment” means “a judgment, ruling, conciliatory statement or order of payment in civil or commercial matters that is given by a designated court”.

15.  Section 7 of the Ordinance stipulates that the time limit for making an application for registration of a Mainland judgment shall be 2 years. It shall be calculated:

(a)  Where a period for performance of the Mainland judgment has been specified in the judgment, from the last day of the period; or

(b)  In any other case, from the date from which the judgment takes effect.

16.  The judgment creditor has to satisfy a number of requirements in order to cause a Mainland judgment to be registered in the Court of First Instance. 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;

(iii) a designated court upon an appeal against a judgment of the case given by—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court; or

(iv) a designated court upon a retrial of the case which has been tried in—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court;

(b) the relevant choice of Mainland court agreement is made on or after the commencement date* of this Ordinance but before the commencement date^# of the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645);

(c) the judgment is final and conclusive as between the parties to the judgment;

(d) the judgment is enforceable in the Mainland; and

(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).”

17.  “Chosen court” has been defined in section 2 of the Ordinance to mean “the court or any of the courts specified in the choice of Mainland court agreement or choice of Hong Kong court agreement, as the case may be, as the court to determine a dispute to which the agreement applies”.

18.  On the other hand, “choice of Mainland court agreement” has been defined to be “an agreement concluded by the parties to a specified contract and specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdictions”: Section 3(2) of the Ordinance.

19.  After a Mainland judgment has been registered in the Court of First Instance, any party against whom a registered judgment may be enforced may apply to set aside the registration. Such registration shall be set aside if the Court of First Instance is satisfied that:

“(a) the judgment is not a Mainland judgment which satisfies the requirements specified in section 5(2)(a) to (e);

(b) the judgment has been registered in contravention of this Ordinance;

(c) the relevant choice of Mainland court agreement is invalid under the law of the Mainland unless the original court has determined that the agreement is valid;

(d) the judgment has been wholly satisfied;

(e) the courts in Hong Kong have exclusive jurisdiction over the case according to the law of Hong Kong;

(f) the judgment debtor who did not appear in the original court to defend the proceedings—

(i) was not summoned to appear according to the law of the Mainland; or

(ii) was so summoned but was not given sufficient time to defend the proceedings according to the law of the Mainland;

(g) the judgment was obtained by fraud;

(h) a judgment on the same cause of action between the parties to the judgment has been given by a court in Hong Kong or an arbitral award on the same cause of action between the parties has been made by an arbitration body in Hong Kong;

(i) a judgment on the same cause of action between the parties to the judgment has been given by a court in a place outside Hong Kong or an arbitral award on the same cause of action between the parties has been made by an arbitration body in a place outside Hong Kong, and the judgment or award has already been recognized in or enforced by the courts in Hong Kong;

(j) the enforcement of the judgment is contrary to public policy; or

(k) the judgment has been reversed or otherwise set aside pursuant to an appeal or a retrial under the law of the Mainland.”

(section 18(1) of the Ordinance)

20.  It is undisputed that the burden of proving the ground(s) for setting aide under section 18(1) of the Ordinance rests with the party seeking to set aside the registration. The standard of proof is “on the balance of probabilities”, that is, the usual civil standard: China Citic Bank Corporation Limited (Quanzhou Branch) v Li Kwai Chun & Others [2019] HKCFI 2540, at [38] – [40].

D.  THE GROUNDS OF SETTING ASIDE

21.  The defendant relied on the following grounds in each of these setting aside applications:-

(1)  The Ruling is not a Mainland judgment which satisfies the requirements specified in section 5(2)(a) of the Ordinance in that the Ruling is not given by a chosen court as there was no choice of Mainland court agreement within the meaning of section 3(2) of the Ordinance insofar as the Ruling is concerned (pursuant to section 18(1)(a) of the Ordinance) (“the No Choice of Mainland Court Agreement Ground”);

(2)  The Ruling is not a Mainland judgment which satisfies the requirements specified in section 5(2)(e) of the Ordinance in that the Ruling does not order the payment of a sum of money (pursuant to section 18(1)(a) of the Ordinance) (“the No Payment Order Ground”);

(3)  The Ruling has been registered in contravention of the Ordinance in that the nature of the Ruling itself is not a Mainland judgment which is capable of being enforced as it is a legal document to terminate the previous enforcement procedures in the Mainland (pursuant to section 18(1)(b) of the Ordinance) (“the Contravention Ground”);

(4)  The defendant did not appear in the original court to defend the proceedings and was not summoned to appear according to the law of the Mainland as there were no court proceedings in the Mainland for the defendant to appear (pursuant to section 18(1)(f) of the Ordinance) (“the Not Summoned to Appear Ground”);

(5)  It would be contrary to public policy to enforce the Ruling (even assuming that the Ruling is capable of being enforced) in that its enforcement would likely contravene the law of a friendly jurisdiction, i.e. the PRC Enterprise Bankruptcy Law (企業破產法) as the Borrower has applied for bankruptcy and reorganisation in the Mainland, upon which all execution procedure and all legal actions should have been suspended pursuant to Articles 19 and 20 of the said Law, and its enforcement against the defendant would not be just and equitable because of the plaintiff’s participation in the ongoing reorganisation of the Borrower (pursuant to section 18(1)(j) of the Ordinance) (“the Public Policy Ground”);

(6)  There was material non-disclosure on the part of the plaintiff for failing to inform the Court about the ongoing reorganisation of the Borrower under the PRC Enterprise Bankruptcy Law and the plaintiff’s participation in the reorganisation of the Borrower; and failing to inform the Court that the legal documents which sought to enforce the defendant’s obligations under the Guarantee Agreement had been effective for more than 2 years when the plaintiff commenced the proceedings herein (pursuant to the inherent jurisdiction of the Court) (“the Material Non-Disclosure Ground”).[2]

E.  DISCUSSION

E1.  The No Choice of Mainland Court Agreement Ground

22.  It may be recalled that, pursuant to Clause 12.2 of the Guarantee Agreements (“Clause 12.2”), parties agreed that:

“保證人承諾：如保證人不履行或不完全履行其在本合同項下的義務時，自願接受司法機關的強制執行，而無需經過訴訟程序；債權人可根據《民事訴訟法》第二百三十八條規定，直接向有管轄權的人民法院申請強制執行，而無需經過訴訟程序，保證人放棄對債權人直接申請強制執行的抗辯權。”

23.  In other words, it was their agreement 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 (“Article 238”).

24.  The defendant argued that Clause 12.2, properly construed, does not constitute a “choice of Mainland court agreement” within the meaning of section 3(2) of the Ordinance, because, as explained by the PRC law experts of both sides, the Mainland Courts’ jurisdiction over the disputes arising from or in connection with the Guarantee Agreements has been excluded by this clause. In other words, 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.

25.  Reliance has been placed on the expert opinion as expressed in the expert report dated 12 October 2023 of Mr Zhu Zejun and Mr Yang Yifeng, which stated that:

“選用内地法院協議僅指約定内地法院爭議 管轄權的協議，不包括約定執行管轄權的協議。

…

執行管轄權不等於爭議 管轄權。《王毓瑩的專家報告》的回答實際上間接承認了本案不涉及爭議管轄權，也不存在約定内地法院爭議 管轄權的協議，相關判决(裁定)也就不能在香港執行。” (original emphasis) (at page 5 thereof)

26.  Hence, it was submitted that the Mainland Court at most only had jurisdiction over execution matters, but not the disputes themselves.

27.  Whether Clause 12.2 qualifies as a “choice of Mainland court agreement” as defined in section 3(2) of the Ordinance is a matter of interpreting the Ordinance applying Hong Kong law: Beijing Renji Real Estate Development Group Co Ltd v Zhu Min [2022] 4 HKC 116, at [40]. In this regard, the crucial statutory provision, section 3(2) of the Ordinance, reads:

“choice of Mainland court agreement (選用內地法院協議) means an agreement concluded by the parties to a specified contract and specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdictions.” (emphasis added)

28.  For the defendant’s argument to succeed, on one hand, one has to limit the word “dispute” in section 3(2) of the Ordinance to mean “dispute on liability”, and on the other hand, to exclude any dispute on enforcement/execution matters, even if those matters are in connection with the Guarantee Agreements. However, there is nothing in the statutory provision which would support the defendant’s constrained interpretation thereof. In my view, the words “in connection with” should not be interpreted in such a narrow way. These words are apparently wide in nature[3] and should cover all disputes other than those which are entirely unrelated to the Guarantee Agreements. Hence, they must be wide enough to cover disputes over enforcement matters.

29.  The defendant then argued that Clause 12.2 falls outside the rubric of section 3(2) of the Ordinance because the relevant People’s Court is designated not by mutual agreement of the parties but by operation of statute. Parties had only chosen the regime provided under Article 238 in the event of non-performance on the part of the defendant, but they had not made any choice of Mainland Court at all.

30.  To support this argument, reference has been made by Mr Lam SC to the case of Zhu Min (supra). In that case, there was a Partnership Agreement between the creditor and someone else, and there was also a Guarantee. The defendant therein was only a party to the Guarantee but not a party to the Partnership Agreement. The Guarantee did not contain any clause which specified the Mainland Courts or any of them as the court having the jurisdiction to deal with the relevant disputes. However, in the Partnership Agreement, there was such a clause. By virtue of the operation of the principles of construction or substantive legal rules under the Mainland law, the jurisdiction clause in the Partnership Agreement was treated as applicable as between the parties to the Guarantee. Upon the above background, G Lam JA had the following to say:

“42. In my view, the Guarantee, which is the written agreement between the parties here, does not specify the courts in the Mainland or any of them as the courts with jurisdiction to resolve their disputes. There is nothing in the Guarantee whereby the parties make that agreement, either directly or by reference to another document. In fact, the Guarantee is completely silent on the parties’ choice of court. It has admittedly been held that, under Mainland law, which is the governing law of the Guarantee, the jurisdiction agreement in clause 90 of the Partnership Agreement is applicable to the disputes between the parties under the Guarantee, but as explained by the Higher People’s Court that conclusion is based on the effect of Mainland law, not the provisions of the Guarantee.

43. For this reason, the […] Judgment is not registrable under the [Ordinance]”

31.  Mr Lam SC argued that, by the same token, the parties to the Guarantee Agreements herein did not choose Mainland Court at all. It was said that, just like the parties to the Guarantee in Zhu Min who were dictated by the choice made in the Partnership Agreement, the parties to the Guarantee Agreements herein were dictated by the PRC law on the court which would have jurisdiction pursuant to Article 238, and the parties herein were not permitted to designate any particular Mainland Court of their choice for enforcement matters. In other words, the designation of the relevant court under Clause 12.2 is based on the effect of Mainland statute, but not provisions of the Guarantee Agreements. That being so, Clause 12.2 cannot be construed as a choice of Mainland court agreement within the meaning of section 3(2) of the Ordinance.

32.  I am afraid I cannot accept such arguments.

33.  As accepted by Mr Lam, the provisions in the Guarantee in Zhu Min were totally silent on the parties’ choice of court. However, the situation in the present case is different, in that the parties have expressly chosen the regime under Article 238. This is a very important difference, which renders the analysis in Zhu Min inapplicable to the present case. This is because, even though the parties to the Guarantee Agreements have only chosen to give effect to Article 238, which by virtue of regulation 2 of the People’s Supreme Court mandates that specific courts deal with the direct execution process, this is still an agreement of the parties. This is still their choice.

34.  Moreover, it should be noted that section 3(2) only requires the parties to choose the Mainland courts or any of them to determine their disputes. By choosing the regime under Article 238, there is no doubt that the parties have chosen the Mainland courts (but not the courts of any other countries) to determine their disputes. The requirement of section 3(2) is therefore satisfied. In this regard, it is worthwhile to refer to what Lisa Wong J stated in The Export-Import Bank of China v Taifeng Textile Group Company Limited & Another [2018] HKCFI 1840, at [76]:

“Indeed, while it is understandable that Ms Zhou has zoomed in on the jurisdiction of the Beijing Court, it is worthy of note that the definition of a choice of Mainland court agreement in s 3(2) does not require parties to a choice of Mainland court agreement to limit their choice to a specified designated court. A general choice of the courts of the Mainland would suffice.” (emphasis added)

35.  In both senior counsel’s oral submissions, it has been emphasised that “parties’ autonomy” should be respected, in that they should be free to choose where they should resolve their dispute. Here, the parties have expressly chosen the regime under Article 238, pursuant to which appropriate Mainland court(s) will handle their dispute on enforcement matters. In effect, they have chosen the courts which will be designated pursuant to the Mainland law under the Article 238 regime. Although they have exercised their power to choose in such a limited way, that is still their choice. Why shouldn’t their choice be respected?

36.  Mr Lam SC, while he was on his feet, further expanded his argument and submitted that the Ordinance is not catered towards a regime such as that provided by Article 238 but only a judgment which includes a determination of the rights and obligations between parties.

37.  With respect, I do not think it is up to the court to add criteria as such. So long as the criteria laid down in section 5 of the Ordinance are satisfied, the Mainland judgments should be registered; and as long as the grounds under section 18 of the Ordinance are not made out, the registration of the judgments should not be set aside.

38.  The No Choice of Mainland Court Agreement Ground is therefore rejected.

E2.  No Payment Order Ground

39.  Under this Ground, the defendant argued that the Rulings (see [10] above) are not orders which have the effect of compelling or demanding him to make any payment to the plaintiff. They are not rulings which order the payment of a sum of money within the meaning of section 5(2)(e) of the Ordinance.

40.  The views of the PRC law experts are different on whether the Rulings have the effect of ordering the “payment of a sum of money” as a matter of Mainland law.

41.  The defendant’s counsel have helpfully summarised the experts’ respective opinion in their skeleton argument which I would gratefully adopt as follows:

“65. Minsheng’s experts opine that the Rulings are orders requiring Mr Fu to pay a sum of money to Minsheng, as:

(1) Mr Fu agreed to mandatory execution (強制執行) upon any breach of the Guarantee Agreement on his part, without the need for any litigation and hearing (不經訴訟). Thus, Minsheng is entitled to rely on the Notarisation Certificates and Execution Certificates to apply to the Court for direct enforcement against Mr Fu. This itself constitutes an order demanding Mr Fu to pay a make payment of a sum of money;

(2) Mr Fu’s outstanding indebtedness stated in the first paragraph of the Rulings (‘申請執行標的額’) corresponds to the amount stated in the relevant Execution Certificate. The Rulings thus have the effect of requiring Mr Fu to pay the stated amount of money to Minsheng, which have been adjudicated as due and owing by Minsheng under the Execution Certificate.

[…]

66. Mr Fu’s experts disagree. Their position is that the Rulings do not have the effect of ordering Mr Fu to pay any sum of money to Minsheng:

(1) The Beijing Court’s statement in the Rulings (reproduced in §19 above) merely describes the obligations of Minsheng and Mr Fu inter se. It does not have the effect of ‘demanding’ Mr Fu to pay any sum of money to Minsheng;

(2) References in the Rulings to the amount of Mr Fu’s alleged indebtedness do not form the operative part of, and any adjudication under, these judgments (裁定書裁定的事項). They cannot be read as an order requiring payment of sums of money by Mr Fu to Minsheng;

(3) Unless and until Minsheng applies for the resumption of the Execution Procedures and such an application is accepted by the Beijing Court, Minsheng is not entitled to rely upon the Rulings to enforce against Mr Fu’s assets to satisfy his alleged indebtedness to Minsheng. This fortifies the fact that the Rulings are not orders requiring payment of sums: it is not a monetary judgment which can be directly relied upon for enforcement purposes.”

(original emphasis)

42.  I accept the defendant’s submissions that, on a plain reading of the Rulings, there was no demand of payment against the defendant at all. Apart from pronouncing the termination of the execution process, the “adjudication” (裁定) did no more than describing the continuing obligation on the part of the defendant to pay. However, it is obvious that it was not an order of payment in itself. It only referred to an obligation which had been pronounced by the Beijing Court sometime ago on 14 January 2020 in its Notice of Execution.

43.  This conclusion is not affected by the fact that the amount due was stated in the earlier part of the Rulings. Even though the Court should take the whole Rulings into account, in my view, it does not necessarily mean that it is reasonable to put two parts of the Rulings together, which is the approach suggested by the plaintiff’s counsel. In the present case, I am of the view that such an approach is wrong, and would distort the effect of the Rulings.

44.  Insofar as it is suggested by the plaintiff that the conclusion as to whether the Rulings are legally enforceable in the Mainland would shed light to the question as to whether it is an order for payment, I disagree. As pointed out by the defendant’s counsel, the fact that a document is legally enforceable does not shed any light on the nature of the order thereunder.

45.  It should also be borne in mind what the experts said in this regard, as helpfully summarised by the plaintiff’s counsel as follows:

“It is not disputed that P has to apply and obtain a set of new rulings on execution (執行裁定書) in order to execute on D’s assets: Jingsh 1^st Opinion p.7 [B/52/175]; Jiang Opinion §§11.5- 11.6 [B/53/202-203]; Jingsh 2^nd Opinion p.7 [B/56/237]. But the point is that in order to resume the execution procedure and obtain a new set of rulings on execution, the Disputed Adjudication has to be relied upon: Wang Opinion §13.1.3 [B/55/221-222]. This legal position is not disputed in Jingsh 2^nd Opinion at pp.7-8 [B/56/237-238]. The Disputed Adjudication is therefore legally enforceable in Mainland China.”[4] (original emphasis)

46.  I would have thought that it is natural for the Rulings to be relied on in the further enforcement procedure (if one is resumed) because they are the latest Rulings which record the result of the enforcement and the corresponding net amount yet to be paid by the defendant. That would become the starting point of the resumed enforcement procedure. However, if the Rulings are “legally enforceable” in this sense, then that only reinforces the defendant’s argument that there was no order for payment made under the Rulings.

47.  It was further argued by the plaintiff that, according to its PRC law expert, the adjudication can be challenged by the defendant by submitting a written objection to the Beijing Court, and if the Beijing Court refuses to accede to the challenge, the defendant can apply to the higher court for review. It was therefore said that there is an adjudicative nature in the Rulings.

48.  In my view, one has got to consider the whole Rulings in context so as to understand the expert evidence properly. The Rulings are dealing with the enforcement procedure and the amount of money which has been successfully enforced. As pointed out by the plaintiff’s own expert, it is when the defendant disputes the amount recovered upon enforcement (“執行的金額”) or the conduct of execution (“執行行為”) that he can make the challenge and apply for review[5]. Although the result of such challenge/review would have an impact on the outstanding amount payable, that would not make the Rulings an order for payment.

49.  Furthermore, one may recall that there is a time limit of 2 years within which the judgment creditor must apply for registration of judgment in Hong Kong. If the plaintiff is right, then that would mean that every time there is a partial execution of a previous order for payment, and whenever the Mainland Court issues “adjudication” like the Rulings, the time of 2 years would run again. That cannot be right. The absurdity of this result reinforces my view that the Ruling simply cannot be an order for payment which is intended to be covered by the Ordinance.

50.  I therefore conclude that the defendant has made out the No Payment Order Ground, and therefore the registrations of the Rulings should be set aside.

51.  Strictly speaking, there is no need for me to consider the 5 remaining Grounds. However, for the sake of completeness, I shall do so below.

E3.  The Contravention Ground

52.  Under this Ground, the defendant argued that, since the Rulings are not enforceable in the Mainland, the requirement under section 5(2)(d) is not satisfied and therefore the registrations of the Rulings must be liable to be set aside.

53.  Section 6(2) of the Ordinance provides that:

“For the purposes of section 5(2)(d), a Mainland judgment is deemed, until the contrary is proved, to be enforceable in the Mainland if a certificate is issued by the original court certifying that the judgment is final and enforceable in the Mainland.”

54.  For this purpose, the plaintiff has produced a Certificate (生效證明) issued by the Beijing Court on 15 November 2022 which certifies that the Rulings have taken legal effect.

55.  The defendant argued that the aforesaid Certificate cannot possibly be referable to the Rulings because it predates the Rulings. This argument must be bad because it is factually incorrect: The Rulings are dated 1 December 2020, which predate the said Certificate rather than the other way round.

56.  The defendant then argued that the Rulings are not directly enforceable because the plaintiff admittedly has to rely on the Notarisation Certificates and Execution Certificates (and not the Rulings) to apply for enforcement.

57.  With respect, I do not think this argument assists the defendant. As pointed out by Mr Man SC, there is simply no requirement of “direct” enforcement under the Ordinance as such.

58.  The Contravention Ground is therefore rejected.

E4.  The Not Summoned to Appear Ground

59.  Under this Ground, it was submitted that since the Rulings were given in circumstances where the defendant, who did not appear in the original Court to defend the proceedings, was not summoned to appear according to the law of the Mainland, the registration of the Rulings ought to be set aside pursuant to section 18(1)(f) of the Ordinance.

60.  Section 18(1)(f) of the Ordinance reads:

“[…] the registration of the judgment shall be set aside if the Court of First Instance is satisfied that—

(f) the judgment debtor who did not appear in the original court to defend the proceedings—

(i) was not summoned to appear according to the law of the Mainland; or

(ii) was so summoned but was not given sufficient time to defend the proceedings according to the law of the Mainland”

61.  It is undisputed that, as a matter of PRC law, there was no court hearing in respect of the Rulings, because the parties had elected to adopt the regime under Article 238.

62.  Be that as it may, it was argued by the defendant that there was a breach of natural justice, for the defendant had never been summoned to attend any hearing.

63.  It was further alleged that since the defendant was never summoned to take part in any court proceedings, that is the end of the matter, for section 18(1)(f) applies immediately.

64.  With greatest respect, these arguments must be rejected.

65.  First, I agree with the plaintiff’s analysis that this Ground is only applicable where the law of the Mainland lays down a requirement of summoning the judgment debtor to appear, but somehow the requirement is not complied with. That is apparently not the case here, because pursuant to Article 238, no such summoning would be necessary. The condition of “not summoned to appear according to the law of the Mainland” simply did not exist.

66.  Second, I do not accept the defendant’s argument that the words “according to the law of the Mainland” in section 18(1)(f) mean that the mode of summoning is required to satisfy the relevant Mainland law requirement. Taking into account the purpose and the rationale behind this provision, I am of the view that the focus must be on whether the defendant has been summoned to appear, rather than on the mode of summoning. Hence, in my view, the words “according to the law of the Mainland” must be referring to whether the defendant is required to be summoned to appear.

67.  Third, while the defendant has placed heavy emphasis on natural justice and procedural fairness, one must not forget that it is undeniable that it was the defendant who agreed to adopt the Article 238 regime, under which he has waived his right to defend. It is not up to him to make a complaint that he was not summoned to appear before the Mainland Court.

68.  Fourth, an analogy may be drawn with the situation in Hong Kong where the defendant decides not to contest the plaintiff’s claim by ticking “No” in the Acknowledgement of Service. In such a case, judgment would be entered against the defendant, and he would not be summoned to attend Court. In such a situation, can it be said that section 18(1)(f) is satisfied by the mere fact that the defendant is not “summoned to appear”? Clearly not.

69.  The Not Summoned to Appear Ground is therefore rejected.

E5.  The Public Policy Ground

70.  The background of this Ground has been set out by the defendant’s counsel which I gratefully adopt as follows.

71.  Following the termination of the Enforcement Procedures pursuant to the Rulings, reorganisation proceedings were initiated against the Borrower. By a Civil Judgment (民事裁定書) dated 9 August 2022, the Mainland Court accepted an application to place the Borrower into reorganisation (“受理湖南富興集團有限公司對新華聯有限公司 [the Borrower] 的重整申請”) (“the Reorganisation”).

72.  The plaintiff has itself participated in the Reorganisation and has registered the alleged debt owed by the Borrower with the Bankruptcy Administrator designated by the Mainland Court on around 28 October 2022. Verification of the alleged debt took place at the Borrower’s first creditors meeting on 8 November 2022.

73.  As at June 2023, three potential investors have been shortlisted to facilitate the Reorganisation of the Borrower. The identities of such investors were expected to be finalised by mid-to-late July 2023, by which time the Reorganisation would have made substantial progress.

74.  Upon the above background, the defendant argued this Ground in the following way:

“(1) The enforcement of the Rulings would jeopardise the ongoing Reorganisation and bankruptcy proceedings of the Borrower in the Mainland, which is concerned with inter alia the very same debt arising out of the Loan Agreement (guaranteed by [the defendant] under the Guarantee Agreement).

(2) Given that the Mainland is a friendly jurisdiction of Hong Kong, it would be repugnant to the public policy of Hong Kong for the Hong Kong Courts to enforce the Rulings, in circumstances where this would detrimentally affect the Reorganisation and relevant bankruptcy proceedings brought in the Mainland, as well as the wider interests of the body of the Borrower’s creditors in the Mainland as a whole.”[6]

75.  According to the expert evidence adduced by the defendant:

“目前，新華聯控股重整工作時間緊迫，實際控制人傅軍先生熟悉重整企業情況，在重整期間有助於配合管理人與潛在重整投資人和債權人進行協商、談判，重整計劃草案的通過也需要實際控制人的支持。在此期間，如新華聯控股實際控制人傅軍先生在香港的財產被司法強制執行，實際控制人傅軍先生配合重整工作的積極性將可能受到嚴重影響，新華聯控股重整投資人的信心也將受到打擊，進而影響到包括民生信託在內的債權人得到清償。若新華聯控股無法及時完成重整工作及執行完畢重整計劃，全體債權人、職工等各方權益將遭受重大損失。”[7] (emphasis added)

76.  With greatest respect to the defendant’s experts, and to the defendant’s counsel who saw fit to rely on this aspect of the opinion, this argument is made to be rejected.

77.  First of all, taking the defendant’s case to the highest, it is only possible (可能) that the defendant’s motivation to cooperate in the Reorganisation would be (or had been) adversely affected. However, as pointed out by the plaintiff’s counsel, the defendant himself did not assert that his motivation would be so affected. Hence, this argument immediately falls away. Any argument which is made on the basis of such alleged “detrimental impact” also collapses.

78.  Second, I cannot see why it can be said that it is highly unfair and inequitable for the plaintiff to, on one hand, participate in the Reorganisation of the Borrower, and on the other hand, continue to take action against the defendant as guarantor in respect of the same underlying debt simultaneously. After all, it is undisputed that the defendant and the Borrower have joint and several liability to repay the debts. It is absolutely proper for the plaintiff to try to recover the debt from both of them, so long as there is no double recovery.

79.  As far as double recovery is concerned, as the plaintiff’s counsel pointed out, there is no reason to believe (and it is not so asserted by the defendant) that any recovery of debts in Hong Kong would not be taken into account in the Reorganisation. Furthermore, given the defendant’s involvement in the Reorganisation, there is no doubt that he would know if there is indeed any double recovery as such.

80.  Third, it cannot be against public policy for a creditor to go after his debtor on the basis that such a debtor may as a result be less motivated to cooperate in another matter, even if that matter would affect the rate of recoverability of debt of his company.

81.  The defendant’s counsel also queried whether the Beijing Court was aware of the existence of the Reorganisation and the plaintiff’s participation therein when the Rulings were issued. As a matter of fact, since the Reorganisation only started on 9 August 2022, the Beijing Court could not possibly have been aware of it when the Rulings were issued on 1 December 2020. In any event, such knowledge is totally irrelevant for the present purpose.

82.  For the above reasons, I take the view that the Public Policy Ground is totally unmeritorious.

E6.  The Material Non-Disclosure Ground

83.  Under this Ground, it was alleged that the plaintiff had failed to disclose and/or draw to the Court’s attention matters relating to the ongoing Reorganisation of the Borrower and the plaintiff’s very own participation in the same.

84.  For the reasons explained under section E5 above, the Reorganisation of the Borrower is totally irrelevant, particularly when the bankruptcy restructuring of the Borrower is far from complete, and the plaintiff has not recovered anything thereunder.[8]

85.  Hence, applying an objective test as to materiality, I am of the view that there was no “material non-disclosure” as alleged.

86.  This Ground is therefore rejected.

E7.  The Miscalculation of Interest Ground

87.  Since this Court shall set aside the registrations of the Rulings, strictly speaking, I do not have to deal with the arguments under this head. However, for the sake of completeness, I will deal with it briefly.

88.  I will first of all set out the background in relation to this Ground below. For the sake of convenience, I would focus on the figures in HCMP 1943/2022. The circumstances under the other 3 cases are identical to those under HCMP 1943/2022, only the principal amount (and as a result the interest) are different. The relevant background is as follows:

(1)  On 25 November 2022, the plaintiff filed the Ex parte Originating Summons herein and applied for registration of the Rulings as Judgments of the Court of First Instance. In each of the applications, the plaintiff described the relevant Ruling as requiring the defendant to pay a principal sum “and the interest accrued thereon”.

(2)  Having raised a number of requisitions and considered the plaintiff’s replies to those requisitions, Master Hui, by a memorandum dated 7 March 2023, granted leave to register the Rulings, with the following remarks:

“According to s.11 of Cap.597, please calculate the outstanding amount of the judgment sum up to the time of registration (i.e.sealing of the order to be made herein) using the rate of exchange prevailing at the date of the submission of the draft order for approval. In this regard, when submitting the draft order for approval by the Court’s clerk, please also enclose a letter showing the calculation of the judgment amount up to the date of sealing using the prevailing exchange rate. To this end, liaison with the Court’s clerk is necessary so as to ensure prompt approval of the order for the purpose of registration of the order at High Court Registry within the same day.”

(3)  On 15 March 2023, the plaintiff’s solicitors wrote to Master Hui’s clerk, and stated, among other things, that:

“[…] The formula for the calculation of the accrued interest up to 25 November 2022 (i.e. the date when the proceedings were commenced) has been set out in paragraph 11.4 of the Expert Report […]. By applying the same formula, the interest accrued up to today (i.e. 15 March 2023) is calculated as follows […] = RMB63,739,726.03”

(4)  As a result of the above representation, the sum of RMB63,739,726.03 was stated to be the “interest accrued” on the principal sum in the Notice of Registration of Mainland Judgment in HCMP 1943/2022.

(5)  Pursuant to the defendant’s experts, under the PRC law, the interest would stop accruing on the day an enterprise’s bankruptcy application is accepted, and this principle is applicable to a guarantor of a debt owed by an enterprise whose bankruptcy application is accepted.

(6)  Since the Borrower’s application to be placed in the Reorganisation was accepted by the Mainland Court on 9 August 2022, interest should therefore have stopped accruing on the same day.

89.  On the basis of the above, it was argued that, even if none of the grounds for setting aside the registrations of the Rulings has been made out, the Court should at least discharge part of the registration orders which provide for an inflated amount of interest.

90.  The plaintiff has not adduced any expert evidence to challenge the defendant’s case that the interest should only have accrued up to 9 August 2022 by reason of the Reorganisation. However, it was argued on its behalf that:

(1)  Although the Rulings themselves did not put forward the specific amount of interest payable or the formula for calculation, the Rulings referred to the Execution Certificates which were said to be the basis of the plaintiff’s application for execution. The Execution Certificates did set out how interest should be calculated and state that interest should accrue up to the date of repayment by the defendant;

(2)  As the defendant has not challenged the Rulings or the Execution Certificates on the calculation of interest in the Mainland (and he could have done so), this is the end of the matter, as the role of the Hong Kong Court is to register the Rulings as they are, and it cannot independently rule on whether the calculation of the interest under the Rulings or the Execution Certificates is correct or not.

91.  With respect, I do not accept the plaintiff’s submissions.

92.  It is undisputed that the registration of Mainland Judgements should be in terms of what was readily apparent on the face of the Mainland judgment, without the necessity of the Hong Kong Court scrutinising the evidence or documents in the Mainland proceedings, or conducting a mini-trial of the evidence as to the correct sum allowed and ordered to be payable by a judgment debtor: Foshan Nanhai Branch of Industrial and Commercial Bank of China Ltd v Foshan Ruifeng Petroleum and Chemical Fuel Co Ltd [2019] 2 HKLRD 478, at [39].

93.  Therefore, I do not consider it right for the plaintiff to invite the Court to scrutinise the Execution Certificates.

94.  Furthermore, it should not be forgotten that the calculation of interest was provided by the plaintiff’s solicitors by letter to the Court. In the event such calculation was wrong which led to an erroneous order, there is no reason why the Court should not take action so as to correct the mistake.

95.  Therefore, I agree with the defendant that in the circumstances where all the previous grounds are dismissed, the Court should at least discharge part of the registrations of the Rulings and re-register them by reference to the correct amount of interest.

ORDER

96.  By reasons of the aforesaid, I order that the registrations of the Rulings be set aside on the ground that the Rulings do not satisfy the requirement under section 5(2)(e) of the Ordinance in that they do not order the payment of a sum of money.

COSTS

97.  While the defendant has successfully set aside the registrations, many of the grounds which he relied on have been rejected.

98.  I therefore make a costs order nisi that the plaintiff shall bear 25% of the defendant’s costs of the Summonses, with certificate for two counsel, to be taxed if not agreed.

99.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.