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The Export- Import Bank Of China v Liu Qingping

Judgment Cited authorities 17 Cited in Precedent Map Related
Judgment Date03 August 2018
Neutral Citation[2018] HKCFI 1840
Judgement NumberHCMP1684/2015
Year2018
CourtCourt of First Instance (Hong Kong)
HCMP3012/2015 THE EXPORT- IMPORT BANK OF CHINA v. TAIFENG TEXTILE GROUP CO LTD AND ANOTHER

HCMP 3012/2015 & HCMP 1684/2015

(HEARD TOGETHER)

[2018] HKCFI 1840

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3012 OF 2015

______________

IN THE MATTER OF Section 5 of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap .597)
and
IN THE MATTER OF Order 71A of the Rules of High Court
and
IN THE MATTER OF a judgment given by the No. 4 Intermediate People’s Court of Beijing Municipality of the People’s Republic of China on 12 June 2015

______________

BETWEEN
THE EXPORT- IMPORT BANK OF CHINA
(中國進出口銀行) 		Plaintiff
And
TAIFENG TEXTILE GROUP COMPANY LIMITED
(泰豐紡織集團有限公司) 		1st Defendant
LIU QINGPING(劉慶平) 2nd Defendant

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1684 OF 2015

____________________

IN THE MATTER OF an application for interim relief pursuant to section 21M of the High Court Ordinance (Cap.4)

____________________

BETWEEN
THE EXPORT- IMPORT BANK OF CHINA
(中國進出口銀行) 		Plaintiff
And
LIU QINGPING (劉慶平) Defendant

____________________

(HEARD TOGETHER)

Before: Hon Lisa Wong J in Court
Date of hearing: 24 May 2017
Date of decision: 3 August 2018

_____________________

D E C I S I O N

_____________________

BACKGROUND

The dispute

1. Pursuant to a loan agreement dated 18 October 2103 (“Loan Agreement”), The Export-Import Bank of China (“Bank”), a licensed bank in Mainland China, extended export credit in the amount of RMB100,000,000 (“Loan”) to Taifeng Textile Group Company Limited (“TTG”), a company incorporated and carrying on business in Mainland China, for a term of 12 months. The Loan Agreement contained express provisions on governing law and dispute resolution as follows:

“第十二章 適用法律及爭議解決

第三十三條 本合同適用中華人民共和國法律。

第三十四條 在本合同履行期間，凡因履行本合同所發生的或與本合同有關的一切爭議、糾紛，雙方可協商解決。協商不能解決時，任何一方均可以依法向北京有管轄權的人民法院起訴。雙方同意，因履行本合同發生的或與本合同有關的訴訟應在北京有管轄權的人民法院進行。” (emphasis added)

2. As security for the Loan, by an earlier pledge dated 15 October 2012 (“Pledge”), TTG had agreed to pledge certain landed properties in Mainland China to the Bank to secure the timely repayment of its indebtedness to the Bank arising under any contract signed between them from 15 October 2012 to 15 November 2014. The Pledge contained express provisions on governing law and dispute resolution as follows:

“第十六章 適用法律及爭議解決

第六十一條 本合同適用中華人民共和國法律並按照中華人民共和國法律解釋。

第六十二條 在本合同履行期間，凡因履行本合同所發生的或與本合同有關的一切爭議、糾紛，雙方可協商解決。協商不能解決時，任何一方均可以依法向北京有管轄權的人民法院起訴。雙方同意因履行本合同發生的或與本合同有關的訴訟應在北京有管轄權的人民法院進行。”(emphasis added)

3. By a guarantee dated 17 October 2013 (“Guarantee”), Mr Liu Qingping (“Liu”), a Mainland Chinese citizen, agreed to assume joint and several liability not exceeding RMB100,000,000 for TTG’s indebtedness to the Bank arising under any contract signed between them from 17 October 2013 to 17 October 2014. The Guarantee contained express provisions on governing law and dispute resolution as follows:

“第十章 適用法律及爭議解決

第三十一條 本合同適用中華人民共和國法律並按照中華人民共和國法律解釋。

第三十二條 在本合同履行期間，凡因履行本合同所發生的或與本合同有關的一切爭議、糾紛，雙方可協商解決。協商不能解決時，雙方同意，因履行本合同發生的或與本合同有關的訴訟應在北京有管轄權的人民法院進行。”(emphasis added)

4. The Loan became due on 17 October 2014. TTG failed to repay any part of the Loan or any contractual interest thereon. As of 9 January 2015, a sum of RMB103,956,822.05 was due from TTG to the Bank in principal and interest under the Loan Agreement.

Proceedings against TTG and Liu in the Mainland

5. On 9 February 2015, the Bank commenced legal proceedings (“Mainland Proceedings”) in the Beijing No 4 Intermediate People’s Court (“Beijing Court”) against (1) TTG as borrower for repayment of the Loan and performance of the Pledge and (2) Liu as guarantor for repayment of the Loan.

6. On 26 February 2015, upon the Bank’s application, the Beijing Court made an asset preservation order in the Mainland Proceedings, freezing TTG’s assets (comprising mainly of factory premises in a remote part of Laiwu some of which are already “pending attachment” in proceedings by other creditors) up to the value of RMB103,956,822.05 pending the determination of the Mainland Proceedings.

7. Neither TTG nor Liu entered an appearance in the Mainland Proceedings. On 12 June 2015, after trial from which TTG and Liu were absent, the Beijing Court entered judgment in favour of the Bank. The judgment included the following orders for payment of money (“Mainland Judgment”):

(1) that TTG should repay the Bank within 10 days of the Mainland Judgment taking effect:

(a) the outstanding principal of the Loan (i.e. RMB100,000,000);

(b) accrued interest up to and including 9 January 2015 (i.e. RMB3,956,822.05); and

(c) interest from 10 January 2015 until payment at the standard interest rate agreed under the Loan Agreement

(“Mainland Judgment Debt);

(2) that Liu should be jointly and severally liable for repaying the Mainland Judgment Debt (but with the right to seek indemnity from TTG after paying the Bank);

(3) that TTG and Liu should pay additional interest in accordance with section 253 of the Civil Procedure Law of the PRC if they should fail to make repayment within the time prescribed by the Mainland Judgment; and

(4) that TTG and Liu should bear court’s fees in the sum of RMB561,584 and asset preservation fees in the sum of RMB5,000, to be paid within 7 days of the Mainland Judgment taking effective.

8. The Mainland Judgment became effective on 27 June 2015, there being no appeal from the same within the prescribed 15 days limited for appeal.

9. As of 2 July 2015,the Mainland Judgment Debt (for principal, interests and costs) added up to RMB106,842,727.31.

10. On 9 July 2015, the Bank applied to the Beijing Court for execution of the Mainland Judgment against TTG and Liu.

11. On 9 October 2015, the Beijing Court issued to the Bank a document entitled “執行案件立案通知書” (“Mainland Enforcement Notice”) which stated as follows:

“你申請與被執行人泰豐紡織集團有限公司劉慶平強制執行一案，經審核，你的申請符合《中華人民共和國民事訴訟法》第二十章關於申請執行的規定，本院決定立案。” (original emphasis)

12. On 10 October 2015, the Beijing Court issued a “執行通知書” to each of TTG and Liu, directing them to comply with the Mainland Judgment.

13. Upon TTG and Liu’s continuing default, on 12 November 2015, the Beijing Court delivered an “enforcement ruling” (“執行裁定書”), with immediate effect, to freeze, appropriate and authorise the realisation of TTG and Liu’s bank deposits, income and other assets up to the value of RMB104,523,406.05 plus further interest and costs.

PROCEEDINGS IN HONG KONG

14. The applications with which the court is presently concerned arise from the proceedings taken by the Bank to enforce the Mainland Judgment in Hong Kong.

Under s 21M of the High Court Ordinance (Cap 4)(“HCO”)

15. Taking the Hong Kong proceedings chronologically, firstly, by an originating summons issued in HCMP 1684/2015 on 10 July 2015 (“Injunction Proceedings”), the Bank applies against Liu under s 21M of the HCO for Mareva relief, in aid of the Mainland Proceedings, to restrain him from removing from Hong Kong or in anyway disposing of, dealing with or diminishing the value of, any of his assets within Hong Kong up to the value of RMB106,842,727.31 including in particular:

(1) the 6,234,000 shares (representing a 1.62% shareholding) held by Liu (“Liu’s Shares”) in China Taifeng Beddings Holdings Ltd (“Taifeng”), a company listed on the Main Board of the Hong Kong Stock Exchange (stock code 973) and of which Liu is the chairman and an executive director; and

(2) 75,000,000 shares (representing a 7.5% shareholding) (“Fu Sun’s Shares”) in Taifeng held by Fu Sun Development Limited, of which Liu is the sole shareholder and sole director.

(The trading of which has been suspended since 26 February 2015 with a closing price of HK$1.08 per share, initially at Taifeng’s pending the release of an announcement in relation to a very substantial acquisition of Taifeng. Although the acquisition eventually fell through in late 2015, the suspension has continued pending fulfillment of the resumption conditions imposed by The Stock Exchange of Hong Kong Limited (“HKEx”).)

16. On 17 July 2015, upon the Bank’s application (dealt with on an ex parte on notice basis), Madam Justice Au-Yeung granted a Mareva injunction against Liu (but specifically excluding Fu Sun’s Shares) (“Injunction Order”) until 21 August 2015, the return date of the Bank’s inter partes summons.

17. The Injunction Order was continued by Mr Justice Anthony Chan on 21 August 2015. His Lordship declined the Bank’s application (dealt with on an ex parte basis) to vary the Injunction Order to include Fu Sun’s Shares. The Injunction Order was further continued by Mr Justice To on 1 September 2015. Pursuant to Au-Yeung J’s order dated 7 January 2016, the Injunction Order is to be continued and remain in force until further order of the Court.

Under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (“MJREO”)

18. Secondly, by an application made ex parte on affidavit on 11 November 2015 in HCMP 3012/2015 (“Registration Proceedings”), the Bank applies against both TTG and Liu for registration of the Mainland Judgment as a judgment in the Court of First Instance (“CFI”) of the Hong Kong Special Administrative Region pursuant to the MJREO.

19. In support of the application:

(1) Insofar as Liu is concerned, the Bank relies on clauses 31 and 32 of the Guarantee (“Clause 31” and “Clause 32” respectively) (see paragraph 3 above) as constituting or...

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