17 August, 2018
The Hong Kong Court of First Instance (“CFI“) recently handed down judgment in Export-Import Bank of China v Taifeng Textile Group Co. Ltd and Another [2018] HKCFI 1840, which concerns the enforcement of a Mainland judgment in Hong Kong. The CFI provided guidance on various aspects of the enforcement exercise which serves as useful practice reminders for practitioners.
Background
The plaintiff, Export-Import Bank of China (“Bank“) attempted to enforce a monetary judgment handed down by the Beijing No.4 Intermediate People’s Court in their favour against Taifeng Textile Group Co. Ltd, the borrower under a loan agreement, and a guarantor to the loan (together “Obligors“). The Bank made the following applications before the CFI:
A Mareva injunction in aid of foreign proceedings under section 21M of the High Court Ordinance (“section 21M“). An ex parte injunction was granted over a part of the guarantor’s assets, and the Court refused to grant relief over the remaining portion of the guarantor’s assets. At the inter partes hearing, the Bank applied for the Mareva injunction to also cover that remaining portion.
Subsequently, registration of the Mainland judgment as a judgment in the CFI pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (“MJREO“). The CFI granted registration.
In response, the guarantor applied to set aside the registration of the Mainland judgment, and to have the Mareva injunction discharged. The CFI dismissed the former application, but granted the latter application on the grounds that there was no evidence of a risk of dissipation and material non-disclosure.
The Court’s observations regarding the pursuit of enforcement applications are of particular note.
Key takeaway points for enforcement applications
(1) Interpretation of “choice of Mainland court agreement” under the MJREO
In order to enforce a Mainland judgment under the MJREO, the relevant agreement must provide for a “choice of Mainland court agreement” (section 5(2)(b), MJREO). The CFI clarified that such a requirement, as defined in section 3(2) of the MJREO, is fulfilled if the jurisdiction clause, properly construed in accordance with the governing law of the contract, confers exclusive jurisdiction on the courts in the Mainland. It is not necessary that expressions such as “exclusive“, “sole” or “no other court shall have jurisdiction” (or like words) be used, so long as the jurisdiction clause in substance and effect confers exclusive jurisdiction. The CFI also observed that the MJREO does not require parties to limit their choice of court to a particular court within the Mainland; a general choice of the courts of the Mainland would suffice.
(2) Proper documentation in attaining a Registration Order under the MJREO
The guarantor challenged the propriety of the registration of the Mainland judgment, as the Bank had failed to provide a “certificate issued by the original court certifying that the judgment is final and enforceable in the Mainland” (“Original Court Certificate“) as required under Order 71A rule 3(1)(a)(iii) of the Rules of the High Court and section 6(2) of the MJREO. Instead, the Bank had provided an enforcement notice issued by the Beijing court. The issue before the CFI was whether other means or documents apart from the Original Court Certificate could be sufficient for the purposes of proving enforceability under section 5(2)(d) of the MJREO.
The CFI held that the reference to an Original Court Certificate in the MJREO and the Rules of the High Court is merely directory in nature, and that the ultimate question for the court to answer is whether the Mainland judgment was enforceable in the Mainland. In the present case, the CFI was satisfied that the enforcement notice issued by the Beijing court is sufficient proof of the enforceability of the Mainland judgment. The CFI noted that whilst the Original Court Certificate is not the only means of proving the enforceability of a Mainland judgment, parties seeking registration of a Mainland judgment under the MJREO are, in any event, advised to obtain the same in order to prevent unnecessary argument.
(3) Interim injunctions granted under section 21M after foreign judgment has been attained
The Court was also asked to consider whether, in circumstances where judgment had already been entered in the foreign proceedings but the applicant had yet to commence enforcement proceedings in Hong Kong, interim relief can be granted under section 21M.
The Court decided this question in the affirmative. The CFI observed that Mareva injunctions are commonly granted post-judgment, and that legal proceedings do not come to an end with the entry of judgment. Importantly, construing section 21M in a narrow fashion to preclude the granting of interim relief after judgment in foreign proceedings, but before substantive recognition and enforcement proceedings have been commenced in Hong Kong, runs contrary to the purpose of section 21M to facilitate the process of execution or enforcement of foreign judgments.
(4) Adducing expert evidence on foreign law generally
As a side note, the Bank adduced expert evidence to the effect that under PRC law, selecting Beijing as having jurisdiction over any disputes in the guarantee effectively excludes other courts from exercising jurisdiction. However, its PRC counsel had not verified her opinion with a statement of truth and had not made a declaration of compliance with the Code of Conduct for Expert Witnesses. Whilst the CFI considered the PRC legal opinion to be nevertheless admissible in this instance as the statement of truth and declaration of compliance are typically only required under Order 38 rules 37A and 37C of the Rules of the High Court (which were not applicable in this instance), the CFI noted that experts should give both the statement of truth and declaration of compliance as a matter of good and prudent practice.
Comment
It remains to be seen whether the CFI judgment will be appealed. In the meantime, this judgment serves as a reminder that the Hong Kong courts continue to adopt a purposive approach in statutory interpretation, and that practitioners should carefully comply with the requirements for applications to register Mainland judgments. In particular, the finding as to the broad application of section 21M, in that it can be used to seek interim relief post-judgment, is welcome clarification for parties dealing with recalcitrant judgment debtors in foreign proceedings.
For further information, please contact:
Dominic Geiser, Partner, Herbert Smith Freehills
dominic.geiser@hsf.com
