The Enforcement Challenges of Chinese Notarised Debt Instruments in Hong Kong
China Minsheng Trust Co., Ltd v Fu Kwan [2025] HKCA 462; Hon Chu VP, Au and G Lam JJA in Court, 21 May 2025
Fact
Pursuant to four loan agreements entered into on 4 April 2019, the plaintiff, China Minsheng Trust Co., Ltd (“Minsheng”) lent four sums of money to the borrower New China United Holdings Ltd (“Borrower”). On the same day, Minsheng also entered into four guarantee agreements with the defendant Mr Fu Kwan (“Fu”), whereby Fu agreed to guarantee each of the loans under the loan agreements. The loan agreements and guarantee agreements each contain a provision allowing Minsheng to take steps pursuant to Art. 238 of the Civil Procedure Law of the PRC to apply for direct enforcement of the borrower’s or the guarantor’s obligations in the event of default without going through litigation.
Following the Borrower’s default and Fu failing to repay, Minsheng took steps for direct enforcement under the aforementioned procedure. On 6 January 2020, Minsheng applied for, and on 13 January obtained, certificates of execution (執行證書) from the Beijing Notary Office. With these execution certificates, Minsheng sought enforcement in the Beijing No. 3 Intermediate People’s Court (“Beijing Court”). The Beijing Court issued a Notice of Execution (執行通知書) to the Borrower and Fu, commanding them to pay, and later an execution ruling ordering their assets to be frozen.
During the proceedings, the enforcement procedures were once terminated due to a settlement reached by the parties but were soon resumed since Borrower and Fu had not fulfilled the settlement agreement. Eventually, on 1 December 2020, the Beijing Court issued four rulings (執行裁定書) terminating the enforcement procedures in each of the four cases (“the Rulings”) on the grounds that Fu has no recoverable assets available for enforcement in the Mainland, as acknowledged and agreed by Minsheng. In the final paragraph of the Rulings, the Beijing Court confirmed that “the persons subject to enforcement have the obligation to continue to fulfill the debt obligation to the applicant for enforcement” (para. 14).
Minsheng then sought to register the Rulings in Hong Kong under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (“MJREO”). Notably, it was based on the above-quoted sentence that Minsheng had pinned its case for registration of the Rulings in Hong Kong (para. 15).
Legal Principles
The MJREO establishes a simple and streamlined registration mechanism for a wide range of Mainland judgements to be recognised and enforced in Hong Kong.
Section 2 of the MJREO defines “Mainland judgment” (內地判決) as “a judgment, ruling, conciliatory statement or order of payment in civil or commercial matters that is given by a designated court”. “Designated court” (指定法院) is defined as “a court in the Mainland which is specified in Schedule 1”.
In order to enforce a mainland judgement by registration under the MJREO, the five requirements specified in section 5(2)(a)-(e) must all be satisfied:
(a) the judgment is given by a “chosen court” stipulated in a choice of Mainland court agreement;
(b) the relevant choice of Mainland court agreement is made between 1 August 2008 and 29 January 2024;
(c) the judgment is final and conclusive as between the parties to the judgment;
(d) the judgment is enforceable in the Mainland; and
(e) the judgment orders the payment of a sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty).
Issues
On appeal, Fu applied to have the registration set aside based on three grounds:
(1) the Rulings are not Mainland judgements that satisfy section 5(2)(a) in that they were not given by a chosen court (the “No Chosen Court Ground”);
(2) the Rulings are not Mainland judgements that satisfy section 5(2)(e) in that they do not order the payment of a sum of money (the “No Payment Order Ground”); and
(3) the defendant did not appear in the Beijing Court to defend the proceedings and was not summoned to appear according to the law of the Mainland as there were no court proceedings in the Mainland for the defendant to appear in (the “Not Summoned to Appear Ground”).
Ruling
The No Payment Order Ground
The key issue was whether the Rulings satisfied the requirement in section 5(2)(e), requiring a judgement to order payment of a sum of money. The Court of Appeal held that the Rulings were not judgments that ordered the payment of a sum of money within the meaning of section 5(2)(e) and the registration of the Rulings was correctly set aside by the lower court on this ground.
The court pointed out that the court proceedings in the Mainland for direct enforcement of the notarised debt instruments (i.e. the Guarantee Agreements) are special in that the rights and liabilities of the parties are in effect determined by the notary office and thereafter enforced by the courts, and the courts do not engage in any adjudication of those rights and liabilities unless there is an application or litigation brought by a party to oppose the enforcement. In this case, the objects of enforcement (執行標的) and the relevant sums of money to be payable were determined not by the Beijing Court but by the Beijing Notary Office. An Execution Certificate issued by a notary office or its determination of the money payable is obviously not a “Mainland judgement” within the scope of the MJREO for registration. (para. 32)
The court further explained that while the Rulings issued by the Beijing Court were within the definition of “Mainland judgement”, the purpose and function of the Rulings was merely to bring the enforcement proceedings to an end—the true “adjudication” made in the Rulings was that those enforcement proceedings were concluded. The final sentence of the Rulings, which was relied upon by Minsheng, was simply a description or recitation of the existing state of affairs, i.e. Fu remained liable for performing his obligations, but not a judgement or order which itself made money payable. (para. 33)
The No Chosen Court Ground
The court generally agreed with the lower court’s ruling that clause 12.2 of the Guarantee Agreements was the relevant “choice of Mainland court agreement” and thus section 5(2)(a) was satisfied. Since there was no dispute actually raised by the parties on this point and the Rulings failed to satisfy other requirements for registration (i.e. the No Payment Order Ground), the court found it unnecessary to discuss in very detail as to whether clause 12.2 satisfied section 5(2)(a) under this Ground.
The Not Summoned to Appear Ground
Section 18(1) of the MJREO provides that the registration of the judgement shall be set aside if any one of the matters specified in paragraphs (a) to (k) is satisfied, including in particular:
“(f) the judgment debtor who did not appear in the original court to defend the proceedings—
(i) was not summoned to appear according to the law of the Mainland; or
(ii) was so summoned but was not given sufficient time to defend the proceedings according to the law of the Mainland;”
Fu contended that since he did not, and was not summoned to appear in the Beijing Court to defend the proceedings according to the law of the Mainland, the registration of the Rulings must be set aside pursuant to section 18(1)(f)(i). He argued that paragraph (i) was satisfied as long as the person was not summoned in a manner that accorded with Mainland law.
The lower court held that the phrase “according to the law of the Mainland” is not concerned with the mode of summoning but whether the judgement debtor must by Mainland law be summoned to appear, and therefore section 18(1)(f)(i) is only applicable where Mainland law requires the judgement debtor to be summoned to appear. This did not apply to the present case because the procedures for enforcing notarised debt instruments in the Mainland do not require the debtor to appear before court. The Court of Appeal agreed with the lower court and rejected Fu’s arguments.
Comments
This case sets a precedent as to whether Chinese notarised debt instruments could be enforced in Hong Kong. Chinese notarised debt instruments are unenforceable in Hong Kong because: (a) the execution certificates are issued by notarial offices, not courts, and therefore they do not fall within the definition of “Mainland judgement” under the MJREO; and (b) the related court documents of these instruments also lack explicit payment orders to satisfy the requirement of section 5(2)(e) under the MJREO.
As seen from the above, this case reveals a system challenge connected with the requirements of the MJREO. Chinese notarised debt instruments provide creditors with great domestic efficiency owing to the unique procedures, while that also makes them fall outside the scope of the MJREO to be enforceable. The difficulties in enforcing Chinese notarised debt instruments abroad are not unique to Hong Kong but could appear in broader common law jurisdictions as well, where a court-issued judgement with explicit payment orders is necessary for enforcing that foreign judgement.
When engaging in Chinese notarised debt instruments, creditors should be aware of the risks associated with enforcing those instruments in Hong Kong and/or other common law jurisdictions in the event of default. They are advised to strategically balance the risks and benefits before entering into those instruments. When necessary, they may choose other dispute resolution procedures, such as litigation or arbitration, to reduce the uncertainty in international enforcement.