This article uses two civil judgments of second instance made by the Supreme People's Court to conduct a legal analysis of the fault determination of applying for litigation property preservation. The two cases are Hainan Zhichengda Real Estate Development Co., Ltd. (hereinafter referred to as Hainan Zhichengda Company), Zheng Jinhong's dispute over liability for property preservation damage in the application lawsuit (hereinafter referred to as Hainan Zhichengda Company case), and Zhejiang Dongyi New Energy Power Technology Co., Ltd. (hereinafter referred to as Zhejiang Dongyi Company) The case of Ningbo Langhui Tools Co., Ltd. concerning the dispute over property preservation damage liability in the application lawsuit (hereinafter referred to as the Zhejiang Mobile First Company case).

 

In the case of Hainan Zhichengda Company, the cause of action is a dispute over liability for property preservation damage in the application lawsuit. The second instance case number of the Supreme People's Court is (2020) Supreme Law and People's Court No. 1316. In the Zhejiang Mobile First Company case, the cause of action is a dispute over liability for property preservation damage in the application lawsuit. The second instance case number of the Supreme People's Court is (2020) Supreme Law Zhimin Zhong No. 521. The causes of the two cases are consistent, and both cases are subject to the final judgment of the Supreme People's Court of second instance. However, the determination of fault liability for the application for litigation property preservation is completely different.

 

The Supreme People's Court determined that the preservation behavior of the applicant in the Hainan Zhichengda Company case was not illegal in itself, nor was there any subjective fault, and rejected the defendant's claim for compensation for the preservation losses from Hainan Zhichengda Company. In the Zhejiang Mobile One Company case, the Supreme People's Court found that the applicant, Zhejiang Mobile One Company, violated the principle of prudence and should be considered as "an application error" under Article 105 of the Civil Procedure Law, and should compensate the respondent for the losses caused by its preservation.

 

1、 In the case of Hainan Zhichengda Company, the judgment basis of the Supreme People's Court is that the determination of fault in applying for litigation property preservation cannot be based solely on the fact that the litigation request has not been ultimately supported as the basis for determining whether the applicant has a fault, but rather on the usual objective standard, namely, the duty of care of ordinary people. Existence of losses is a necessary condition for assuming liability for wrongful damages in litigation property preservation

 

（1） Application of the Civil Code

 

According to Article 24 of the "Several Provisions of the Supreme People's Court on the Application of the Time Effect of the Civil Code of the People's Republic of China", the provisions of the Civil Code shall apply to civil dispute cases where the infringement occurred before the implementation of the Civil Code, but the damage consequences occurred after the implementation of the Civil Code.

 

Therefore, the Supreme People's Court believes that this case is a second instance case of a dispute over liability for property preservation damage in an application for litigation, and therefore the provisions of Article 165 of the Civil Code of the People's Republic of China should be applied. The first paragraph of Article 165 stipulates, "If the perpetrator infringes upon the civil rights and interests of another person through fault, he shall bear tort liability." The second paragraph stipulates, "If the perpetrator is presumed to be at fault according to the law, and cannot prove that he is not at fault, he shall bear tort liability."

 

Therefore, the provisions of the Civil Code apply to this case.

 

（2） Basis for judging the fault of applying for litigation property preservation

 

1. Elements of fault

 

"An error in applying for property preservation in litigation that causes losses to the respondent is a general tort, and it should be determined whether the applicant for property preservation should compensate for the corresponding losses according to the constitutive requirements of the general tort.". For the determination of fault in applying for litigation property preservation, it is not only based on the fact that the litigation request has not been ultimately supported as the basis for determining whether the applicant has fault, but also based on the usual objective standard, that is, the duty of care of ordinary people.

 

2. Whether there is any fault in the preservation of litigation property

 

Article 100, paragraph 1, of the Civil Procedure Law of the People's Republic of China stipulates that: "The people's court may, upon the application of the other party, rule to preserve its property, order it to perform certain acts, or prohibit it from performing certain acts in a case where the judgment may be difficult to enforce or cause other damage to the party due to the actions of one party or other reasons. If the party does not apply, the people's court may also rule to take preservation measures when necessary." Article 102 stipulates: "Preservation is limited to the scope of the request or property related to the case."

 

In this case, the purpose of litigation preservation is to ensure the smooth implementation of effective judgments, not to confirm substantive rights and obligations; It is subjectively difficult to predict the differences between the litigants' litigation requests and the judgment results.

 

"If the parties to the lawsuit only differ in their legal judgment on whether the disputed act in question violates the contractual provisions, and not maliciously exercise their litigation rights, it cannot be concluded that the factual and legal basis for the counterclaim filed by the applicant in the pre litigation case is significantly insufficient, and the applicant has not fulfilled the obligation of care for ordinary people to file a lawsuit.". At the same time, the preservation act only objectively achieves the purpose of controlling the land use rights of the subject matter of the dispute, and the land use rights involved in the case are related to the equity value of the lawsuit in this case. They are property related to the case, and the subject matter of the preservation involved in the case does not exceed the scope of the counterclaim request of the applicant for preservation.

 

Therefore, in this case, the purpose of the applicant's preservation of the land use rights and equity interests involved in the case is to ensure that their counterclaim request can be smoothly executed if supported. It is not a malicious exercise of litigation rights, nor is it due to gross negligence and failure to exercise due diligence obligations. The act of applying for property preservation itself does not have any illegality, nor does it have any subjective fault.

 

3. Whether the preservation action has caused property losses to the respondent

 

Article 105 of the Civil Procedure Law of the People's Republic of China stipulates: "If there is an error in the application, the applicant shall compensate the respondent for the losses incurred due to preservation."

 

According to the Civil Procedure Law of the People's Republic of China and relevant judicial interpretations, a party has the responsibility to provide evidence to prove the facts on which his claim is based. If no evidence is provided or the evidence provided is insufficient to prove his claim, the party who bears the burden of proof shall bear the adverse consequences of being unable to provide evidence.

 

In this case, the execution of the court's seizure action only restricts the land use right holders involved in the case from going through the property rights change procedures, and does not prohibit their development and utilization of the land. Therefore, there is no causal relationship between the protective measures involved in the case and the damage consequences claimed by the respondent. Moreover, the losses claimed by the respondent only belong to expenses incurred by the company's normal production and operation, but they have not provided sufficient evidence to prove that the implementation of the court's seizure of the land involved and the application for property preservation by the applicant caused substantial damage and property losses to the respondent.

 

Therefore, the respondent's claim that the applicant should bear joint and several liability for damages for property preservation has no factual or legal basis, and the people's court does not support its claim that the applicant should bear joint and several liability for damages for property preservation.

 

2、 In the Zhejiang Mobile First Company case, the Supreme People's Court based its judgment on the nature, characteristics, and basic principles of civil litigation, and generally pointed to appropriate market subject prudence, basic business ethics, and a fair market competition order. In this case, when judging whether there are errors in applying for property preservation, attention should be paid to the high specificity of such disputes, which are different from ordinary civil tort disputes. It is necessary to focus on reviewing whether the application conforms to the principle of prudence, and then determine whether the application for property preservation has any "errors" under Article 105 of the Civil Procedure Law

 

The civil judgment of the second instance of this case made by the Supreme People's Court found that the act of applying for the preservation of the bank deposits of the respondent by the People's Bank of China No. 1 Company and failing to apply for the dissolution in a timely manner violated the aforementioned principle of prudence, harmed the legitimate rights and interests of the respondent, and should be considered as a "application error" under Article 105 of the Civil Procedure Law. The reasons are as follows.

 

1、 There are deficiencies in the degree of prudence in applying for preservation. The act of applying for freezing the respondent's bank deposits and failing to apply for cancellation in a timely manner violates the aforementioned principle of prudence and should be considered as an "application error" under Article 105 of the Civil Procedure Law.

 

2、 "We should exercise sufficient prudence and restraint in applying for property preservation, especially for those who have already applied for property preservation and have decided to apply for additional property preservation.". "When the applicant for property preservation has successfully frozen the respondent's bank deposits, applying for property preservation again has clearly violated the aforementioned principle of prudence.". Therefore, the application for secondary property preservation is clearly a counter measure in litigation strategy, rather than an enforceable property security consideration. The second application for property preservation has a more obvious irrationality, which refers to the excessive use of preservation remedies and damages the legitimate rights and interests of the respondent.

 

3、 Amendment to the "Provisions on the Causes of Civil Cases"

 

According to the facts identified in the civil judgments of the above two cases, the Hainan Zhichengda Company case was filed in the second instance by the Supreme People's Court on December 15, 2020, and a final civil judgment of the second instance was made on January 28, 2021. The Zhejiang Mobile First Company case was filed in the Supreme People's Court on April 26, 2020, and the final judgment of the second instance was made on March 8, 2021.

 

On December 29, 2020, the Supreme People's Court issued the Decision on Amending the "Provisions on the Causes of Civil Cases", amending the "Provisions on the Causes of Civil Cases" (hereinafter referred to as the "Provisions on the Causes of Civil Cases"), which was first amended on February 18, 2011. The revised "Provisions on the Causes of Civil Cases" shall come into force as of January 1, 2021.

 

In Item 28 of the Supreme People's Court's Decision on Amending the "Provisions on the Causes of Civil Cases", it is clear that under the second level cause of action "30. Tort Liability Disputes", "366. Disputes over Liability for Damage Caused by Application for Pre litigation Property Preservation" should be changed to "392. Disputes over Liability for Damage Caused by Application for Property Preservation"; Add "393. Dispute over Liability for Preservation Damage Due to Application"; "Change" 367. Dispute over liability for damage caused by application for evidence preservation before litigation "to" 394. Dispute over liability for damage caused by application for evidence preservation ", and delete" 368. Dispute over liability for damage caused by property preservation during application for litigation "and" 369. Dispute over liability for damage caused by evidence preservation during application for litigation ".".

 

That is, item 368 of the 2011 "Provisions on the Causes of Action" has been deleted due to the property preservation damage liability dispute in the application lawsuit. Instead, "392. Disputes over Liability for Damage Caused by Application for Property Preservation" in the "Provisions on the Causes of Civil Cases", which came into effect on January 1, 2021. Starting from January 1, 2021, the cause of action for property preservation damage liability disputes will be determined as "disputes arising from the application for property preservation damage liability".

 

4、 Title of the party

 

In the "Civil Judgment" of the second instance of the Hainan Zhichengda Company case, the Supreme People's Court referred to Hainan Zhichengda Real Estate Development Co., Ltd., the party whose property was preserved, as the "protected person". However, according to Article 105 of the Civil Procedure Law of the People's Republic of China, "If there is an error in the application, the applicant shall compensate the losses suffered by the insured due to the preservation." Therefore, It is more accurate to refer to the party whose property is preserved as the "respondent".

 

(This article is translated by software translator for reference only.)