吳作程 v. 梁儷 AND OTHERS

HCMP 2080/2015

MISCELLANEOUS PROCEEDINGS NO 2080 OF 2015

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D E C I S I O N
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1.  This is an application by the 1^st to 5^th defendants to set aside an (amended) order for the registration of a Mainland Judgment dated 28 October 2015.

Background

2.  The plaintiff, as the lender, and the 1^st defendant, as the borrower, entered into a Loan Agreement dated 10 December 2013 in Shenzhen. The 2^nd to 5^th defendants were the guarantors.

3.  The 1^st defendant defaulted in repayment and the parties attended conciliation sessions at the Shenzhen Intermediate People’s Court (the “Shenzhen Court”) which issued a Reconciliation Statement setting out the settlement terms on 4 November 2014 (the “Mainland Judgment”).

4.  Amongst others, the Mainland Judgment contained the following terms, as summerised:

i) The plaintiff should, within 2 days of receipt of the Mainland Judgment, apply to discharge the freezing order on 1^st defendant’s bank account.

ii) Within 2 days after, the 1^st to 5^th defendants shall pay RMB1,000,000 to the plaintiff.

iii) Within 2 days after ii), the plaintiff shall apply to discharge any enforcement orders against the assets of the 1^st to 5^th defendants.

iv) By 20 December 2014, the 1^st to 5^th defendants shall pay the plaintiff RMB59,000,000.

v) By 10 December 2015 and 10 December 2016, the 1^st to 5^th defendants shall pay the plaintiff RMB5,800,000 and RMB50,000,000 respectively.

vi) Within 30 days of the effective date of the Mainland Judgment, the 1^st to 5^th defendants shall pay the costs of proceedings of RMB1,170,000 to the plaintiff.

vii) Should the 1^st to 5^th defendants default the payment of any sums as per the above deadlines, all remaining payments are accelerated so that the rest of the sums becomes immediately due together with interest accrued from 10 December 2014 and calculated at four times the prevailing lending interest rate published by the People’s Bank of China. The plaintiff will also have the right to apply to the court to enforce the whole of the outstanding sum together with interest.

5.  It is not in dispute that steps i) to iii) have been completed. However, the 1^st to 5^th defendants did not pay RMB59,000,000 and RMD1,170,000 as agreed in steps iv) and vi).

6.  On 22 December 2014, the plaintiff applied to enforce the Mainland Judgment in the Shenzhen Court, which issued a Notice of the case number for the enforcement action on 24 December 2014.

7.  On 15 January 2015, the plaintiff obtained a certificate from the Shenzhen Court certifying that the Mainland Judgment is final and enforceable in the Mainland.

8.  On 28 October 2015, the plaintiff obtained an order in this court to registered parts of the Mainland Judgment (as summarised in paragraphs 4(iv) to 4 (vii) above) pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (the “Ordinance”) for the payment of the outstanding sum.

9.  The 1^st to 5^th defendants made the current application to set aside the order on 25 November 2015.

The disputed issues

10.  The defendants did not dispute that the plaintiff submitted the application to unfreeze the defendants’ asset and the Shenzhen Court made that order on 10 November 2014 (paragraph 1 of the 1^st to 5^th defendants’ Skeleton Submission by their Counsel, Mr Tony Ko).

11.  However, the defendants submitted that the asset was not actually discharged “due to unknown reasons”.

12.  Mr Ko alleged that the Shenzhen Court did not conduct the necessary procedure to unfreeze the asset, thus the defendants could not realize the asset in time to repay the plaintiff under the remaining terms of the Mainland Judgment.

13.  According to the report of the defendants’ PRC legal expert, the asset was only “unfrozen” on 14 January 2015, but by then the plaintiff has already obtained an enforcement order (on 24 December 2014).

14.  The 5^th defendant claimed that the 1^st defendant has made an application on 30 September 2015 to set aside the Mainland Judgment (paragraphs 4(ii) and 7 of the 2^nd Affirmation of the 5^th defendant).

15.  However, from the wordings of the application exhibited, this appeared to be an application to set aside the enforcement order rather than the Mainland Judgment itself.

16.  Either way, the defendants submitted no evidence as to the progress, if any, of this application.

17.  Nevertheless, Mr Ko argued that since the decision of that application “had not been dismissed or refused”, paragraphs 4 to 7 of the Mainland Judgment were not “enforceable in the Mainland” and thus should be set aside.

18.  Mr Ko also argued that since the freezing of the asset under the enforcement order, no enforcement action or compulsory sale were conducted.  Thus it appeared that the enforcement order was being withheld.

19.  I disagree.

20.  Section 5(2) of the Ordinance stated: “On an application...., the Court of First Instance shall order the Mainland Judgment to be registered...if the judgment creditor has proved to the satisfaction of the Court...that the following requirements are satisfied –....(d) the judgment is enforceable in the Mainland...”

21.  Section 6(2) of the Ordinance further stated: “For the purposes of section 5(2)(d), a Mainland Judgment is deemed, unless the contrary is proved, to be enforceable in the Mainland if a certificate is issued by the original court that the judgment is final and enforceable in the Mainland.”

22.  The plaintiff has produced that certificate.  The defendants need to “prove the contrary” and submitting a pending application (if indeed it is still pending) to set aside the enforcement order (not the Mainland Judgment) is far from enough.

23.  Further, this application was taken out on 30 September 2015.  If the reason for the defendants’ default was as they alleged, it must surely be the defendants’ duty to pursue such an application vigorously in order to show this court evidence to “prove the contrary”.

24.  In fact, having defaulted payment on 20 December 2014, the defendants made no application to the Shenzhen Court until 30 September 2015, and, after that long delay, the defendants appeared to have done little or nothing to move matters forward.

25.  Instead, the defendants are now asking this court to conduct a mini-trial to assess the merit of that application.  That is not the role of this court.

26.  Similarly, I would reject Mr Ko’s submission that “no compulsory sale” was adequate evidence to show that the enforcement order was being withheld.  In any case, section 5(2)(d) only required the Mainland Judgment to be “enforceable in Mainland”.  There was no requirement for the Judgment Creditor to show that the judgment was “being enforced actively right now in the Mainland”.

27.  As above, I would hold that the 1^st defendant’s application on 30 September 2015 was, at best, an attempt to set aside the enforcement order and not the Mainland Judgment.

28.  This view was reinforced by the opinion by the plaintiff’s PRC law expert: for an appeal against a reconciliation statement that has taken legal effect, a party could apply for a re-trial but this application must be made within 6 months of the reconciliation statement taking legal effect.

29.  The deadline for an appeal has expired on 8 May 2015.  As such, the 1^st defendant’s application on 30 September 2015 could not have been a proper application for an appeal against the Mainland Judgment.

30.  There were arguments between the parties as to what might have become of this application.  However, this is irrelevant since I hold that the application is not an appeal against the Mainland Judgment thus the “final and conclusive” requirement stated in section 6 of the Ordinance is satisfied.

31.  Mr. Ko also argued that section 9 of the Ordinance cannot be applied because the Mainland Judgment was not “in respect of different matters” and therefore “cannot be severed”.

32.  I agree with Ms Tara Liao, Counsel for the plaintiff.  Mr Ko omitted to mention section 13 of the Ordinance.  This section provides for partial registration of a Mainland Judgment when that judgment is for performance in stages.  This is clearly the applicable section in this case.

Order

33.  I would accordingly dismiss the application of the 1^st to 5^th defendants with costs to the plaintiff with certificate to Counsel awarded.

34.  If no agreement on costs is reached, the plaintiff is to serve and lodge a summary statement of costs within 28 days of this Order and the defendants are to serve and lodge a list of objections 28 days thereafter for summary taxation.