湖州升華金融服務有限公司 v. HANG PIN LIVING TECHNOLOGY COMPANY LTD

HCMP 647/2022

[2024] HKCFI 1464

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 647 OF 2022

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BETWEEN

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D E C I S I O N

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Applications

1.  There are 4 summonses before the Court:

1) Summons filed by the defendant (“D”) on 22 September 2023 to set aside the order of a Master dated 30 May 2023 (the “Registration Order”) for the Mainland Judgment dated 26 December 2019 from 浙江省湖州市中级人民法院民事判决書 under (2019) 浙05 民初 11 號 (the “Mainland Judgment”) to be registered as a judgment in Hong Kong pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (the “Ordinance”) (the “Setting Aside Summons”);

2) Summons filed by D on 9 April 2024 for leave to file and serve the 3^rd Affirmation of Lam Kai Yeung;

3) Summons filed by the plaintiff (“P”) on 19 April 2024 for leave to file and serve the 5^th Affirmation of Yau Sin Ting (together with D’s summons filed on 9 April 2024, the “New Evidence Summonses”);

4) Summons filed by P on 3 May 2024 for leave to amend the Registration Order (the “Amendment Summons”).

2.  As a preliminary comment, one can see that the New Evidence Summonses were taken out merely one month before the hearing. The purpose of such New Evidence Summonses was to adduce further PRC legal opinion.

3.  There were a total of 8 PRC legal opinions rendered:

1) The first 3 legal opinions were filed by P in support of its ex parte application to register the Mainland Judgment, some were produced in answer to the requisitions raised by Masters.

2) Upon D having taken out the Setting Aside Summons and directions having been given for the filing of evidence in opposition and evidence in reply, D exhibited a PRC legal opinion to the affirmation of Lam Kai Yeung in September 2023.

3) From then on the situation got out of hand – P, in its affirmation in reply (4^th affirmation of Yau Sin Ting), attached a further PRC opinion by its expert.

4) By consent, D then filed yet another affirmation in reply (2^nd Affirmation of Lam Kai Yeung), attaching another 2 PRC legal opinions in February 2024.

5) Under the New Evidence Summonses, D seeks leave to put in another affirmation in April 2024; and P seeks to put in yet another PRC legal opinion.

4.  It must be noted that the parties, by entering into the consent summons for further evidence to be filed by D in February 2024, arguably misled the court into granting such consent summons on its terms as it was not apparent on the face of it that two additional expert opinions were to be adduced under the guise of further “affirmation in reply”. In doing so, parties had managed to commission and adduce as many legal opinions and on whatever issues as they wished, without first obtaining the Court’s sanction on whether such legal opinions should be sought, given that multiple legal opinions had already been filed previously. In the present case, parties seemed to have proceeded on the basis that there must be a reply to the opinion rendered by the other side’s expert. This approach had led to 2 additional rounds of legal opinions being rendered by each side. The parties also paid no regard to the court’s inclination to have a single joint expert opine on any relevant issues of law.

5.  The restriction on adducing expert evidence under Order 38 rule 36 of the Rules of the High Court (Cap. 4A) precludes parties from adducing expert evidence at the trial or hearing of any cause or matter unless prior leave has been obtained from the court, but such rule does not apply to evidence which is permitted to be given by affidavit^[1].

6.  Parties seemed to have taken advantage of the lack of restriction on adducing expert evidence in affidavits and have in the present case demonstrated how this lack of restriction can be abused. The court is now being put in the unenviable position where it is forced to go through a total of 8 legal opinions.

7.  In my view, a lack of restriction on adducing expert evidence in affidavit evidence does not mean that parties who chose to adduce expert evidence without regard to whether they are relevant to the issues in dispute could do so without any consequences. I therefore indicated to parties that I was only be prepared to consider the New Evidence Summonses and the legal opinions on a de bene esse basis, and would decide if any of the various legal opinions were not relevant and the costs of their preparation ought to be disallowed.

Background

8.  The following background facts are taken from the written submissions of Mr John Hui and Mr Joshua Yeung, counsel for D and are non-controversial:

1) The Mainland Judgment concerned P’s claim for repayment of a loan in the principal sum of RMB 38 million (the “Loan”) pursuant to an agreement dated 5 June 2017 (the “Loan Agreement”). The Loan was advanced to Feng Chen (馮晨) (“Feng”) and Lu Ling (陸凌) (“Lu”) (the “Borrowers”). D and other parties are guarantors of the Loan (the “Guarantors”).

2) In the Mainland Judgment, the Intermediate People’s Court of Huzhou City of Zhejiang Province (the “Zhejiang Intermediate People’s Court”) found against the Borrowers and Guarantors, granting the following reliefs:

a. The Borrowers shall repay P the principal amount of the Loan in the sum of RMB 38 million, together with certain amounts of interest;

b. D is liable for 50% of the part of the Borrowers’ liability that they are unable to repay (“不能清償部份的二分之一”) (“D’s Liability”).

3) D appealed against the Mainland Judgment to the Higher People’s Court of Zhejiang Province (the “Zhejiang Higher People’s Court”). The appeal was dismissed by judgment dated 24 August 2020 (the “Appeal Judgment”).

4) Thereafter, P took steps to enforce the Mainland Judgment against the Borrowers in the Mainland (the “Enforcement Action”):

a. On 24 March 2021, the Zhejiang Intermediate People’s Court issued a (2020) 浙05執94號之一執行裁定書 (the “Enforcement Decision”) setting out certain enforcement steps that were taken by P.

b. After the Enforcement Decision was handed down, P was able to enforce further assets of the Borrowers.

c. Eventually, as recorded in a “湖州市中級人民法院執行局案件執行情况說明” dated 15 March 2024 (the “Enforcement Explanation”), P was by that time able to recover a payment of over RMB 2,115,208.55 from the Mainland Courts.

5) As the Borrowers had still failed to pay their liability in full, P thus applied for the Mainland Judgment to be registered in Hong Kong, presumably for further enforcement in Hong Kong.

6) D then took out the Setting Aside Summons.

Registration of Mainland Judgment under the Ordinance – Applicable Principles

9.  Mimmie Chan J had set out the applicable principles in Foshan Nanhai Branch of Industrial and Commercial Bank of China Ltd v Foshan Ruifeng Petroleum and Chemical Fuel Co Ltd^[2]:

“24. To be registrable under s.5 of the Ordinance, the judgment creditor must prove to the satisfaction of the Court that the requirements set out in s.5(2)(a)–(e) are satisfied. Section 5(2)(c) requires the judgment to be ‘final and conclusive’ as between the parties to the judgment (Final and Conclusive Requirement), and s.5(2)(e) requires the judgment to order ‘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)’ (Sum of Money Requirement).

…

36. If it is claimed that these documents are final and conclusive judgments made by a designated court, and which orders the payment of a sum of money, then these documents should be registered to have the effect provided for under the Ordinance. It is for the creditor to decide what document or order constitutes a judgment to be registrable as an order for the payment of a sum of money under s.5 of the Ordinance. However, if the Court is not satisfied that the particular document which is sought to be registered is one made by a designated court, is final and conclusive, and which orders the payment of a sum of money, to satisfy the requirements of s.5 of the Ordinance, then the judgment is not registrable, and if wrongly registered, then the registration should be set aside under s.18.

37. Upon registration, s.14 of the Ordinance provides that the registered judgment shall, for the purpose of execution, be of the same force and effect as if it had been a judgment originally given in the Court of First Instance and entered on the day of registration. Proceedings may be taken on the judgment upon registration, and the sum for which the judgment is registered shall carry interest.

38. In order to be enforceable as contemplated under the Ordinance, therefore, the judgment sought to be registered should be clear as to a fixed, certain, quantified or at least readily quantifiable sum of money due to be paid by the judgment debtor, for which sum interest is payable from the date of registration, and against which assets of the judgment debtor may be enforced. The judgment debtor should not be uncertain as to its liability under the registered judgment.

39. The purpose of the Ordinance must be to facilitate the recognition and enforcement of Mainland Judgments by a simple and quick process of registration on the basis of a judgment already made by a competent and recognised court. Registration should be in terms of what is 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 the judgment debtor. Nor should submissions be necessary as to the amount due. Registration of a judgment should be on the basis that there can be no more dispute that can be raised as to the amounts due from the judgment debtor, apart from arithmetic calculations under a specified formula.”

10.  Mr Hui and Mr Paul Wong, counsel for P, agreed that the above principles are applicable to the Setting Aside Summons.

Orders in the Mainland Judgment

11.  The relevant orders made by the Zhejiang Intermediate People’s Court in the Mainland Judgment are as follows:

“一、 被告馮晨、陸凌立即歸還原告湖州升華金融服務有限公司借款本金3800萬元，並支付自2017年9月27日起至實際清償日按照月利率1.25%、罰息利率0.75%計算的利息（實際支付時，扣減已支付金額211275.34元），限於本判決生效後十日內付清；

二、 被告…杭品生活科技股份有限公司 [D] 對被告馮晨、陸凌的第一項債務不能清償部份的二分之一承擔賠償責任，並有權向馮晨、陸凌追償；

…

如果未按本判決指定的期間履行給付金錢義務，應當依照《中華人民共和國民事訴訟法》第二百五十三條之規定，加倍支付遲延履行期間的債務利息。”

12.  There is no dispute that D’s Liability is secondary to that of the Borrowers.

D’s Grounds for Setting Aside

13.  D asserts that registration of the Mainland Judgment should be set aside under section 18 of the Ordinance, on the basis that:

1) The Mainland Judgment did not order the payment of a sum of money within the meaning of section 5(2)(e) of the Ordinance.

2) The Mainland Judgment is not final and conclusive within the meaning of section 5(2)(c) of the Ordinance.

3) The Mainland Judgment orders the payment of a penalty; and

4) There is no choice of Mainland court agreement between P and D within the meaning of section 3(2) of the Ordinance.

Whether Mainland Judgment orders payment of a sum of money

14.  Section 5(2)(e) of the Ordinance provides that one of the requirements to be satisfied before a Mainland judgment can be registered is:

“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).”

15.  Mr Hui contended that as held in the Foshan case,

“38. In order to be enforceable as contemplated under the Ordinance, therefore, the judgment sought to be registered should be clear as to a fixed, certain, quantified or at least readily quantifiable sum of money due to be paid by the judgment debtor, for which sum interest is payable from the date of registration, and against which assets of the judgment debtor may be enforced. The judgment debtor should not be uncertain as to its liability under the registered judgment.”

16.  It cannot be disputed that there is no fixed or liquidated sum set out in the Mainland Judgment which can be attributed to D’s Liability. However, Mr Hui fairly accepted that if D’s Liability is a readily quantifiable sum, the fact that no liquidated sum is set out should not be a bar to registration.

17.  On the question of whether D’s Liability is readily quantifiable, Mr Wong’s submission was that after the Enforcement Explanation had been handed down in March 2024, the position was that: a total of RMB 2,115,208.55 had been realized from the Enforcement Action. As such, he had calculated D’s Liability as follows and submitted that D’s Liability is quantifiable:

	Principal	:	RMB 38,000,000.00
Less	Partial Payment	:	RMB 211,275.34
Less	Payment from Enforcement Action	:	RMB 2,115,208.55
			RMB 35,673,516.11
Plus	1.25% Interest per month from 27 Sep 2017 to 26 April 2024 (79 months)	:	RMB 35,227,597.16
			RMB 70,901,113.27
	D’s 50% obligation	:	RMB 35,450,556.63
Plus	PRC costs	:	RMB 29,600.00
			RMB 35,480,156.63

18.  Mr Hui’s submission was that a calculation was simply impossible as the Enforcement Action against the Borrowers has not yet been completed. As such D’s Liability has not yet arisen as it is secondary to that of the Borrowers.

19.  This in turn led to a dispute on whether the Enforcement Action has been concluded: an issue on which most of the legal opinions concentrated.

20.  There is no official legal definition of the term “不能清償” under Mainland Law. As a result, a large proportion of the various expert opinions concentrated on how different experts sought to support their own interpretation. D’s expert opined that the requirement of “不能清償” is satisfied only if the Borrowers are bankrupt, lost their legal status, deceased, or have no properties to be enforced against; whilst P contended that since the Enforcement Action has been concluded, it is clear that the Borrowers have shown that their liability cannot be repaid (不能清償). D then tendered further expert opinion on how the Enforcement Action has not yet been concluded because there are still further assets belonging to the Borrowers that have not yet been enforced.

21.  In my view, the argument on whether the Enforcement Action has concluded or not is a red herring. This is because it is clear from the Enforcement Decision that the Zhejiang Intermediate People’s Court clearly took the view and proceeded on the basis that enforcement against the Guarantors including D was possible, and enforcement was in fact carried out against D. As such, I see little basis for D to contend that D’s Liability under the Mainland Judgment has not yet arisen.

22.  The remaining question is thus whether D’s Liability is readily ascertainable. D’s position is that D’s Liability is not readily ascertainable in the sense that without something akin to a mini-trial, the figure cannot be arrived at. D particularly relies on the fact that the sum of RMB 48,371,172.40 said to be payable under the Registration Order is already higher from the sum of RMB 78,082,175.07 / 2 = RMB 39,041,087.535 currently sought by P.

23.  Mr Hui also submitted that to allow the Mainland Judgment to be registered in the amount currently sought by P may lead to difficulty in the ensuing enforcement proceedings in Hong Kong, such as garnishee proceedings and charging orders, when D’s Liability may be reduced over time. It is said that D will be prejudiced by having its assets irreversibly executed. This is said to be supported by the fact that as compared with the sum stated in the Registration Order, D’s Liability as sought by P at the time of the hearing has changed as the Enforcement Action progressed.

24.  I am not satisfied that on a plain reading of the Mainland Judgment and of section 5(2)(e) of the Ordinance, the relevant orders against D were for the payment of a sum of money by the D:

1) P had to rely on the Enforcement Decision and the Enforcement Explanation before arriving at the conclusion that certain sums had been enforced against the Borrowers; as such, it cannot be said that D is certain as to its liability under the registered judgment.

2) There is doubt as to whether further assets may be available for further enforcement actions – this is a different question from whether D’s Liability has arisen. Whilst I have indicated that the fact that the Enforcement Action carried out against D by the Mainland Court is a clear indication that D’s Liability has arisen, whether further assets may become available is another question. From the available evidence, it is at least arguable that the provident funds as against one of the Borrowers, Feng, has not yet been enforced, and P has voluntarily not enforced against a car belonging to Lu.

3) In any event, I am of the view that if one has to go through the exercise of referring to the Enforcement Decision and the Enforcement Explanation before one can arrive at a figure, the requirement of “the judgment orders the payment of a sum of money” under section 5(2)(e) cannot be said to have been satisfied.

4) In view of the disputes raised by D as to possible further enforcements, I am also not persuaded that the amount of D’s liability can be “readily ascertained”.

25.  I thus find that the Registration Order ought to be set aside for failing to comply with section 5(2)(e) of the Ordinance.

Whether the Mainland Judgment is Final & Conclusive

26.  Section 5(2)(c) of the Ordinance requires that:

“the judgment is final and conclusive as between the parties to the judgment.”

27.  Section 6 of the Ordinance provides:

“(1) For the purposes of section 5(2)(c), a Mainland judgment is final and conclusive as between the parties to the judgment if—

(a) it is a judgment given by the Supreme People’s Court;

(b) it is a judgment of the first instance given by a Higher People’s Court, an Intermediate People’s Court or a recognized Primary People’s Court and— (Amended 17 of 2018 s. 17)

(i) no appeal is allowed from the judgment according to the law of the Mainland; or

(ii) the time limit for appeal in respect of the judgment has expired according to the law of the Mainland and no appeal has been filed;

(c) it is a judgment of the second instance given by a designated court other than a recognized Primary People’s Court; or (Amended 17 of 2018 s. 17)

(d) it is a judgment given in a retrial by a designated court of a level higher than the court whose judgment has given rise to the retrial.

(2) ...”

28.  Mr Hui submitted that the Mainland Judgment, which was given by the Zhejiang Intermediate People’s Court, does not fall within any of the instances set out in section 6(1) of the Ordinance. It is only the Appeal Judgment that can be classified as “final and conclusive”. Therefore, the Mainland Judgment is not eligible to be registered under the Ordinance as it is not “final and conclusive”.

29.  Mr Wong’s response was that as the Mainland Judgment was affirmed by the Appeal Judgment and as such it must mean that the Mainland Judgment is by now final and conclusive.

30.  Whilst this may be correct in the sense that the Mainland Judgment is now valid, effective and enforceable because the appeal was dismissed, a judgment needs to be a judgment that is final and conclusive under the provisions of the Ordinance before it can be registered under the Ordinance, as this is a statutory scheme of registration. There is no room for the court to deviate from the definition and requirements as set out in the Ordinance.

31.  Mr Wong relied on section 6(1)(b)(i) of the Ordinance to argue that the Mainland Judgment is “a judgment of the first instance given by … an Intermediate People’s Court … and — (i) no appeal is allowed from the judgment according to the law of the Mainland” and therefore must be considered as final and conclusive. It was submitted that as the appeal was dismissed, the Mainland Judgment falls under section 6(1)(b)(i) as “no appeal is allowed from the judgment”.

32.  I am unable to accept this submission. From a literal interpretation, “no appeal is allowed from the judgment according to the law of the Mainland” means it is not amenable to appeals under Mainland Law, rather than after the appeal process, the appeal is dismissed. I am of the view that Mr Wong’s submission would only be correct if the provision reads: “no appeal has been allowed from the judgment according to the law of Mainland”. This is supported by the Chinese version of the same provision, which provides:

“如某內地判決 —— … (b) 是由… 中級人民法院或認可基層人民法院作出的第一審判決，而 —— (i) 按照內地法律，該判決是不准上訴的。” (emphasis added)

33.  Other than the above, Mr Wong is unable to point me to a provision which would enable the Mainland Judgment to be considered as having satisfied the requirement of “final and conclusive”.

34.  I thus come to the conclusion that the Mainland Judgment is not final and conclusive under section 6 of the Ordinance. On this ground, the Registration Order must be set aside.

Penalty Interest

35.  P concedes that the court should not register any judgment involving penal nature. P also readily concedes that the penalty interest at 0.75% per month and double interest should not have been registered.

36.  It was submitted that the remaining parts of the Registration Order shall stand good and shall not be set aside.

37.  Mr Hui conceded that if the rest of the Mainland Judgment is capable of being registered under the Ordinance, the offending part as to penal interests can be severed.

38.  However, given my conclusions above on the lack of finality of the Mainland Judgment and the fact that the Mainland Judgment did not order the payment of a sum of money, the complaint of penalty interest does not affect the decision one way or the other.

No Choice of Mainland Court Agreement

39.  Under section 3(2) of the Ordinance:

“In this Ordinance, subject to subsections (3) and (4), 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.”

40.  Section 4 of the Ordinance provides:

“Unless otherwise provided in the specified contract between the parties, a choice of Hong Kong court agreement or a choice of Mainland court agreement that forms part of the contract shall be regarded for the purposes of this Ordinance as an agreement independent of the other terms of the contract and the validity of the agreement shall not be affected by any modification, discharge, termination or nullification of the contract.”

41.  Mr Hui submitted that as it was held in the Mainland Judgment that D’s guarantee obligations under the Loan Agreement were void (“提供的擔保應認定爲無效”), the requirement for a choice of Mainland court agreement is missing.

42.  However, the Appeal Judgment clearly held that: “本案屬於主合同 [Loan Agreement] 有效，保證合同無效的情形。”. There is no dispute that the choice of Mainland court agreement was contained in the Loan Agreement. Section 4 of the Ordinance clearly provides that the validity of the choice of Mainland court agreement is independent of other terms of the contract. Thus, even if the guarantee provision in the Loan Agreement is void, the validity of the choice of Mainland court agreement in Clause 7 of the Agreement is not affected.

43.  In any event, D’s Liability (although found under other provisions of Mainland Law) arose under the provisions in the Loan Agreement. There is no merit in Mr Hui’s submission.

Conclusion on whether registration of the Mainland Judgment should be set aside

44.  I am satisfied that the Mainland Judgment is not final and conclusive as required under section 6 of the Ordinance and was not for payment of a sum of money as against D. The Registration Order against D should be set aside.

45.  I make an order nisi that the costs of the application to set aside the registration of the Mainland Judgment should follow the event, and be paid by the plaintiff to the defendant, with certificate for counsel.

Costs of the preparation of the legal opinions and the New Evidence Summonses

46.  I take no issue with the first 3 legal opinions adduced by P during the ex parte stage of the proceedings, as the legal opinions were adduced in answer to requisitions raised by Masters. I also take no issue with the first legal opinion by Mr Lei adduced by D in support of the Setting Aside Summons on this occasion. However, going forward, as soon as an ex-parte application turns inter-partes, legal advisors should consider seeking directions from the court on whether further expert opinions ought to be adduced by a single joint expert, this is particularly the case if the issue involved is a legal issue.

47.  Mr Lei’s legal opinion dated 18 February 2024 is predominantly for the rebuttal of Mr Ng’s legal opinion dated 7 November 2023. As explained below, costs of Mr Ng’s legal opinion dated 7 November 2023 are disallowed. The costs of Mr Lei’s legal opinion dated 18 February 2024 ought likewise to be disallowed as whether the Mainland Judgment falls within the definition of section 6 is a matter of Hong Kong Law, and the definition of “不能清償” is (as I have found) irrelevant to the determination of the Setting Aside Summons.

48.  Mr Wang’s further legal opinion dated 23 February 2024 cover largely the same issues as that of Mr Lei. There is no explanation on why an additional opinion from another expert ought to be allowed in the first place. Costs of the preparation of Mr Wang’s further legal opinion dated 23 February 2023 are thus disallowed.

49.  Costs of the preparation of Mr Ng’s legal opinions dated 4 May 2022 and 7 November 2023 are disallowed, as whether the Mainland Judgment falls within the definition of section 6 is a matter of Hong Kong Law. The opinion of an expert on the status, effect and progress of enforcement is not required as these are apparent on the face of the Enforcement Decision and the Enforcement Explanation. The opinion on the definition of “不能清償”, as found above, is irrelevant to the determination of the issue.

50.  As the 3^rd Affirmation of Lam Kai Yeung adduced the Enforcement Explanation, which was not previously available, leave is granted to D to file and serve the 3^rd Affirmation of Lam Kai Yeung, with costs in the cause.

51.  As the legal opinion by Mr Ng dated 18 April 2024 does not assist the resolution of the issues, I will dismiss P’s summons filed on 19 April 2024, with no order as to costs.

52.  In light of my decision above, the Amendment Summons is dismissed, with no order as to costs.

53.  I thank counsel’s assistance in the matter.