11 March, 2016
In what appears to be the first reported case under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (Ordinance), Hong Kong’s Court of First Instance dismissed the Defendants’ application to set aside an order for registration of a Mainland Judgment in Hong Kong.
Background
The Plaintiff (as lender) and 1st Defendant (as borrower) had entered into a Loan Agreement in Shenzhen, with the 2nd to 5th Defendants as guarantors. The 1st Defendant defaulted in repayment of the loan and the parties had attended conciliation sessions at the Shenzhen Intermediate People’s Court (Shenzhen Court) which issued a Reconciliation Statement setting out settlement terms (the Mainland Judgment).
The Mainland judgment
The Mainland judgment provided for the Defendants to pay the Plaintiff the sum due under the loan by a number of instalments and for the Plaintiff to apply to discharge a freezing order on the 1st Defendant’s bank account and discharge any enforcement orders against the 1st to 5thDefendants’ assets.
Certificate issued by Shenzhen Court
The 1st to 5th Defendants failed to pay two payments under the Mainland Judgment and so the Plaintiff applied to enforce the Mainland Judgment in the Shenzhen Court. The Shenzhen Court issued the Plaintiff with a Certificate, certifying that the Mainland Judgment was final and enforceable in the Mainland.
Mainland judgment registered in Hong Kong
Armed with the Certificate, the Plaintiff obtained an order from the Hong Kong Court to register the unsatisfied parts of the Mainland Judgment in Hong Kong, pursuant to the Ordinance.
Defendants’ opposition to registration
The Defendants opposed the application on the basis that although the Plaintiff had submitted the application to unfreeze the Defendants’ assets and the Shenzhen Court had made an order in respect of the same, the Shenzhen Court had not conducted the necessary procedure to unfreeze the asset; thus the Defendants could not realize the asset in time to repay the Plaintiff under the Mainland Judgment.
The Defendants claimed that the 1st Defendant had made an application to set aside the Mainland Judgment.
However, the Court found, that at best, the application was to set aside the enforcement order rather than Mainland Judgment itself, but either way, the Defendants had submitted no evidence as to the progress, if any, of that application.
Court’s Ruling
The Court referred to Section 5(2) of the Ordinance which states that “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…” It also referred to Section 6(2), which states: “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.”
As the Plaintiff had produced the Certificate, the Court said, the Defendants needed to “prove the contrary” and that a pending application to set aside the enforcement order (not the Mainland Judgment) was far from enough. Further, the Court said that it was the Defendants’ duty to pursue such application vigorously in order to show this court evidence to “prove the contrary”, which they had not done. Instead, the Defendants were now asking this Court to conduct a mini-trial to assess the merits of that application, which was not its role.
The Court also held that Section 13 of the Ordinance was applicable to this case, as it provides for partial registration of a Mainland Judgment when that judgment is for performance in stages.
Comment
Although the Ordinance has been in effect since August 2008, we are not aware of any reported cases involving an application for setting aside registration of a Mainland judgment in Hong Kong. Equally, we have not seen similar applications in Mainland Courts. In order to have judgment in one place enforceable in another, parties have to expressly provide for exclusive jurisdiction of Courts of the other place. We believe some parties may simply provide for arbitration to resolve their disputes. Awards issued by an arbitral tribunal are enforceable in both Hong Kong and the Mainland and notably also enforceable in the member states of the New York Convention 1958, which consists of 156 countries.
It appears from the judgment that it is not easy to set aside the registration. It may encourage parties to make use of the Ordinance, by providing for Mainland Courts to have exclusive jurisdiction in their contracts.
For further information, please contact:
Rebecca Yip, Deacons
rebecca.yip@deacons.com.hk
