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For a long time, the difficulty of enforcement has become a major pain point in society, and a large number of cases may have property available for enforcement before or during litigation, but during the trial of the case, it is common for debtors to maliciously transfer property and evade debts. In order to avoid similar situations as much as possible, the Civil Procedure Law provides for a property preservation system, which plays an important role in protecting the legitimate rights and interests of the parties. However, because the court cannot fully examine the application for preservation, there are cases of abuse of litigation rights such as erroneous preservation or even malicious preservation in practice.
In this regard, Article 105 of the Civil Procedure Law stipulates that "if the application is erroneous, the applicant shall compensate the respondent for the losses suffered by the preservation", but the Civil Procedure Law and relevant judicial interpretations do not make clear provisions on the "wrong determination" and "compensation standard". Therefore, this article will discuss it in detail in conjunction with relevant judicial cases.
I. How to determine that there is an error in the application for preservation?
01What is error preservation?
According to the Reply of the Supreme People's Court to Recommendation No. 5054 of the First Session of the 13th National People's Congress, erroneous preservation in Article 105 of the Civil Procedure Law means "there is an error in the application", that is, there is an error in the application for property preservation. Error refers to things, behaviors, etc. that are incorrect, inconsistent with objective facts, or incorrect. Incorrect preservation can be understood as an incorrect or illegal application for preservation. Excess preservation can be understood as interim measures applied for in excess of the amount of the subject matter of the claim, which should fall within the category of erroneous preservation.
02 Error preservation shall be based on the subjective fault of the applicant as a constituent element
(1) In judicial practice, error preservation must be based on the subjective fault of the applicant as the constituent element, and cannot be based solely on the fact that the applicant's litigation claims have not been supported as a sufficient condition.
For example, in the (2018) SPC Minshen No. 2027 case, the SPC held that because the parties' legal knowledge, ability to prove the facts of the case, and ability to analyze and judge legal relations are different, they usually do not meet the professional level required by judicial adjudications, so the parties' judgments on the facts of the dispute and their rights and obligations may not be consistent with the people's court's judgment results. The duty of care that a party should perform in applying for preservation should not be too harsh. If the basis for applying for preservation is whether the application for preservation is wrong only based on whether the applicant's litigation claim is supported, it will inevitably hinder the bona fide parties from defending their rights through the litigation preservation procedure in accordance with the law, and affect the function of the litigation preservation system. Moreover, according to the relevant provisions of Tort Liability in China, the tortious act is based on the principle of fault liability, and no-fault liability must have a legal basis, but the relevant provisions on tort liability do not include the damage compensation liability for the wrong application for preservation. Therefore, an error in the application for preservation must be based on the subjective fault of the applicant, and cannot be sufficiently conditioned only if the applicant's claim is not supported.
(2) When determining whether there is subjective fault in the application for preservation, the time point at which the applicant has subjective fault shall be comprehensively determined.
For example, in the (2019) SPC Minzai No. 145 case, the Supreme People's Court held that on the issue of whether the applicant was wrong on the issue of property preservation, it is necessary to examine not only whether the applicant has a legitimate basis of rights and whether it has fulfilled a reasonable duty of care when applying for property preservation, but also to examine whether the applicant treats the preservation act prudently during the period of property preservation, and whether there are circumstances such as not applying for the lifting of the preservation in a timely manner to prevent damage to the legitimate rights and interests of the respondent when applying for property preservation, etc., On this basis, it is comprehensively determined whether the applicant is at fault and the time point at which it constitutes fault.
2. Liability for interim errors
When determining whether the applicant needs to bear the liability for compensation, in addition to analyzing whether the applicant's application for preservation is at fault, it should also analyze whether the respondent has suffered property losses and whether there is a causal relationship between the loss and the preservation error.
1. Where the applicant for property preservation has made a preservation error, but the respondent is unable to prove that he has suffered losses, it is difficult to support the request for compensation for the losses.
For example, in the (2019) Chuan 01 Min Chu No. 4115 case, the court held that "judging from the facts ascertained at trial, the applicant had exceeded the amount of seizure and preservation of the unsold house, but the judgment documents provided by the respondent were all evidence that it should bear the guarantee liability or repayment responsibility to the corresponding creditors due to its identity as a guarantor or borrower, and there was no necessary causal relationship between the excess seizure of the unsold house in this case." The Respondent did not provide evidence to prove that the seized house lost the trading opportunity due to the excess seizure of the unsold property. The Respondent claimed that the loss of interest on funds should be calculated at 6% according to the excess seizure amount, but because the subject matter of the excess seizure was an unsold house rather than a fund, its claim lacked factual basis. Above, the Respondent did not provide sufficient evidence to prove that the applicant suffered the corresponding loss of interest on funds due to the applicant's excess preservation act. The existing evidence is not enough to prove that Hua x Company's excess claim for preservation caused losses to Peng X Company. ”
2. Where the applicant has erroneous preservation, and the respondent claims that the error in preservation has caused losses, it shall be judged according to the specific circumstances.
For example, in the SPC Gazette Case (2017) SPC Min Zhong No. 118 case, the SPC held that:
(1) If it is a frozen fund, when determining the amount of compensation, there is evidence such as a contract to prove that there is a loss of interest on the loan, the actual loss to be compensated is the interest loss agreed in the contract, but the sum of the interest loss and the bank interest of the frozen funds cannot exceed the upper limit of the annual interest rate stipulated in the judicial interpretation of private lending, otherwise, the interest loss of the compensated funds shall be determined with reference to the standard of the benchmark interest rate of the loan of the Chinese Bank for the same period or the annual interest rate stipulated in the judicial interpretation of private lending.
(2) If the house is seized or other assets with changes in market value, if the respondent has not requested disposal for realization or the request is improper and not approved, the risk of depreciation of the value of the preserved property due to market changes shall be borne by itself, and there is no direct causal relationship with the application for property preservation; if the property preservation applicant obstructs the respondent from exercising the right of disposition, the depreciation of the value of the preserved property has a direct causal relationship with the applicant's behavior. The amount to be compensated by the applicant is the difference between the price of the preserved property at the beginning of the preservation and the end of the preservation, and the loss of interest on the funds corresponding to the price at the beginning.
3. Where an applicant for property preservation withdraws a lawsuit, it does not automatically lead to the creation of liability for compensation.
As mentioned above, the erroneous act of preservation is essentially an act of infringement, if the applicant withdraws the lawsuit on its own initiative to terminate the litigation procedure, the court has not made a determination and handling of the rights and obligations on the substance of the case, so it is impossible to directly determine that the applicant was at fault when applying for property preservation, and it does not automatically meet the "subjective fault" requirement of bearing tort liability.
Practical advice
In summary, the property preservation system undoubtedly brings many benefits to litigants, but it is recommended to comprehensively assess its reasonableness when applying for preservation, so as to avoid excessive or "malicious" use of litigation rights and lead to corresponding legal liabilities. At the same time, even if the reasonableness of the application for preservation cannot be estimated in advance, the corresponding duty of care should be exercised during the preservation period, such as reducing the amount of the litigation claim and other changes in the litigation situation, the preservation should be lifted in a timely manner against the "excess part".
On the contrary, if the respondent or interested party suffers losses due to the property preservation applicant's preservation error, it may claim its rights by filing a lawsuit with the people's court that made the property preservation ruling in accordance with Article 105 of the Civil Procedure Law.
Text: Choi Hyun-hee, Kim Heung
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