- In April 2021, the Supreme Court of British Columbia, Canada, puzzled by mechanisms such as retrial and procuratorate protest in the Chinese judicial system, refused to grant a summary judgment enforcing a Chinese judgment on the ground of finality (Yang v. Kong, 2021 BCSC 809).
- Under Chinese law, the second-instance judgment rendered by a local Chinese court is effective and final, and the parties may apply for its enforcement.
- The court in Yang v. Kong, 2021 BCSC 809 did not follow the court view of in another Canadian case(Wei v. Mei, 2018 BCSC 157), which correctly pointed out that the application for retrial does not affect the enforcement of the Chinese judgment in Canada.
- One lesson learned from this case is that Chinese law experts are essential in helping Canadian courts understand Chinese judgments in such cases.
In Yang v. Kong, 2021 BCSC 809, the Canadian judge of the Supreme Court of British Columbia (BCSC), confused by mechanisms such as retrial and procuratorate protest in the Chinese judicial system, could not decide whether the Chinese judgment was final, and thus refused to grant a summary judgment in favor of the Chinese judgment creditor.
On 29 Apr. 2021, the BCSC ruled in this case that the application was generally adjourned. We do not yet have an update on this case.
I. Litigation in China
From 2009 to 2016, the plaintiff Ding Fang lent funds to the defendant Kong Jie on many occasions, involving over CNY70 million. The two parties had a dispute over the CNY 8 million principal and interest. Thereafter, Ding filed a lawsuit against Kong in Shinan Primary People's Court, Qingdao, Shandong Province(“Shinan PPC”), requesting Kong to repay the CNY 8 million principal borrowed by Ding and pay interest at 2% per month until the date of actual repayment.
Shinan PPC, as the court of first instance, held that the evidence showed that the loan claimed by Ding had been fully repaid by Kong, and therefore dismissed Ding's claim (see the civil judgment (2017) Lu 0202 Min Chu No. 4616 ((2017)鲁0202民初4616号))
Ding then appealed to the Qingdao Intermediate People's Court(“Qingdao IPC”), which held that according to common sense, Kong could not have continued to pay interest after repaying the principal. Therefore, based on Kong's payment of interest, Qingdao IPC determined that Kong had not yet repaid the aforementioned CNY 8 million principal.
Accordingly, on 29 Jan. 2019, Qingdao IPC issued a second instance judgment, revoking the first instance judgment and supporting Ding's claims against Kong, but did not support Ding's assertion that the debt should be treated as a family debt of Kong and jointly compensated by her husband (see the civil judgment (2018) Lu 02 Min Zhong No. 9523 ((2018)鲁02民终9523号)).
Both Ding and Kong were dissatisfied with the second instance judgment and applied for retrial to the Shandong High People's Court(“Shandong HPC”). Ding believed that Kong’s husband should be jointly liable. Kong argued that the first instance court’s determination that the loan had been repaid should not have been revoked by the second instance court.
On 5 June 2019, Shandong HPC dismissed the retrial applications of both parties.
On 24 June 2019, Kong filed another lawsuit against Ding in the Zhangdian Primary People's Court, Zibo, Shandong Province(“Zhangdian PPC”). In that lawsuit, Kong stated that she had lent money to Ding which should be repaid, and argued that the debt in dispute had not been tried by Qingdao IPC in the aforementioned case. Ding argued that Kong's alleged records of money lent to Ding were actually records of Kong repaying loans to Ding.
Zhangdian PPC held that the effective judgment of Qingdao IPC had covered all debts in dispute, and Kong did not submit new evidence in this case to prove other transactions. Therefore, the court dismissed her claim (see the civil judgment (2019) Lu 0303 Min Chu No. 4254 ((2019)鲁0303民初4254号)).
On 23 Mar. 2020, Kong further appealed Zhangdian PPC judgment to the Zibo Intermediate People’s Court (“Zibo IPC”).
On 17 June 2020, Zibo IPC dismissed the appeal and upheld the original judgment (see the civil judgment (2020) Lu 03 Min Zhong No. 1258 ((2020)鲁03民终1258号)).
II. Litigation in Canada
Ding and his wife Yang Xin, as plaintiffs, applied to the BCSC for recognition and enforcement of the civil judgment (2018) Lu 02 Min Zhong No. 9523 issued by Qingdao IPC (“Qingdao IPC judgment”) against Kong and Golden Phoenix Investments Ltd.
On 29 Apr. 2021, the BCSC ruled in this case that the application is generally adjourned.
In this case, Ding believed that Kong had real estate in Canada but no assets in China, so he decided to apply for recognition and enforcement of Qingdao IPC judgment in Canada.
Kong stated that she had filed a protest against Qingdao IPC judgment with the Qingdao People's Procuratorate. Kong also explained the situation of cases in Zhangdian PPC and Zibo IPC, and stated that she had applied for a retrial of the Zibo IPC's judgment to Shandong HPC.
The litigation in Qingdao and Zibo confused the BCSC judge, who stated:
“No evidence was introduced about the structure of the legal system in China or the interaction of the various levels of court with each other, or of the potential role or powers of the Procuratorate. There was no evidence about whether the Zibo Appeal had been resolved, and the impact of any such decision on the Intermediate Qingdao Judgment. Based on these gaps in the evidence – which I believe render me unable to find the facts necessary to decide the issues – I have concluded that I cannot adjudicate this matter and it would be unjust to attempt to do so”.
“The plaintiffs’ response to concerns about the uncertainty of the finality of the order before me did not allay my concerns. They urged me to distinguish between the Qingdao and Zibo judgments, which I do, but they do not provide evidence for how to understand them within the broader context of the Chinese Legal System, notably how they interact with the Procuratorate. In a ‘head on’ conflict in the evidence regarding an important issue, the court cannot “sidestep conlic[t] by relying on only a portion of the record, assuming certain facts, or by taking the plaintiff’s case at it’s highest”: Lonking (China) Machinery Sales Co. Ltd. v Zhao, 2019 BCSC 1110 at para. 50.”
The plaintiffs also did not provide expert witnesses to explain the Chinese legal system to the judge and prove that Qingdao IPC judgment was final.
However, the judge believed that while the parties did not need to prove the merits of the Chinese judgment, they needed to prove the finality of the Chinese judgment. The judge's implicit view was that without expert witnesses from the plaintiffs on this issue, he could not make a reasonable determination.
Therefore, the judge stated “I have concluded that I cannot adjudicate this matter. I make no determination on whether a summary trial of this matter could be appropriate if additional evidence were introduced”.
As a result, the judge ruled that the application was generally adjourned.
III. Our Comments
1. Impact of retrial and procuratorate protest on recognition and enforcement of Chinese judgments
According to China's Civil Procedure Law,
(1) Retrial refers to the people's court re-examining legally effective judgments, rulings and settlement statements upon discovering errors therein.
(2) Procuratorate protest refers to the people's procuratorate filing a protest with the people's court against legally effective judgments, rulings made by the people's court that it considers meet the conditions for retrial, or against settlement statements that it believes damage state and public interests, and the court shall then retry the case according to the protest.
The court and procuratorate can also make decisions to retry or protest cases on their own initiative. The parties may apply to the court for retrial and raise objections against the court's retrial and apply for protest to the procuratorate.
In this sense, theoretically, civil litigation in China may go through four procedures: first instance, second instance (effective judgment is rendered in this stage), retrial (by the court on its own or upon application by parties), and retrial after procuratorate protest.
In any case, the second-instance judgment rendered by a local Chinese court is effective and final, and the parties may apply for its enforcement.
In the aforementioned case, the Qingdao litigation had gone through first instance, second instance, and retrial, while the Zibo case had gone through only first instance and second instance. This indicates that in both cases, effective judgments, i.e., second instance judgments, had been obtained.
If the parties have obtained only effective judgments but retrial or protest procedures may already be underway or may occur in the future, can such judgments be considered final judgments for the purpose of applying for recognition and enforcement in Canada?
A similar issue was encountered in another case (see Wei v. Mei, 2018 BCSC 157) of recognizing and enforcing a Chinese judgment in Canada. In that case, another BCSC judge held:
“A Petition for Retrial is not an appeal procedure. The filing of a Petition for Retrial does not affect the enforceability of the Chinese Judgments”.
That judge determined that applying for retrial does not affect the enforcement of the Chinese judgment in Canada. Besides, that case did not involve the procuratorate's protest.
Unfortunately, in Yang v. Kong, 2021 BCSC 809, the plaintiff Ding did not clearly explain to the judge and convince the judge to accept the view in Wei v. Mei, 2018 BCSC 157.
2. Use of expert witnesses in cases involving recognition and enforcement of Chinese judgments
We believe that the failure of the plaintiff in Yang v. Kong, 2021 BCSC 809 to hire an expert witness to explain the Chinese legal system was a key reason why the BCSC judge was confused. The judge also hinted at the importance of expert witnesses.
In fact, in many Chinese judgment recognition and enforcement cases, the parties have invited Chinese law experts to testify in court to explain Chinese law to the judge, making it easier for the judge to understand the Chinese judgment.
For example, in Wei v. Mei, 2018 BCSC 157, both parties invited Chinese law experts to testify in court. The conclusion “applying for retrial does not affect the enforcement of the Chinese judgment in Canada”, which was mentioned above, was a conclusion that was persuaded by the Chinese law expert in the testimony. This is the correct view regarding the finality of Chinese judgments.
One lesson learned from this case is that Chinese law experts are essential in helping Canadian courts understand Chinese judgments in such cases.