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CISG CASE PRESENTATION

China 11 January 2005 Guangdong Province High Court [Appellate Court] (Zhuhai Zhongyue New Communiation Technology Ltd. et al. v. Theaterlight Electronic Control & Audio System Ltd.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050111c1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 20050111 (11 January 2005)

JURISDICTION: People’s Republic of China

TRIBUNAL: Guangdong Province High Court [Appellate Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: (2004) Yue Gao Fa Min Si Zhong Zi Di No. 274

CASE NAME: Zhuhai Zhongyue New Communication Technology Ltd. et al. v. Theaterlight Electric Control & Audio System Ltd.

CASE HISTORY: 1st instance Zhuhai Intermediate People's Court [affirmed]

SELLER'S COUNTRY: People's Republic of China (plaintiff)

BUYER'S COUNTRY: New Zealand (defendant)

GOODS INVOLVED: Lighting facility


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles [-]

Classification of issues using UNCITRAL classification code numbers:

Unavailable

Descriptors: Unavailable

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Click here for Chinese text of case; see also CISG-China Case [HPC/24]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=113>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Guangdong Province High Court

Zhuhai Zhongyue New Communication Technology Ltd. et
al. v. Theaterlight Electronic Control & Audio System Ltd.

11 January 2005

Translation [*] by Zheng Xie [**]

Theaterlight Electronic Control & Audio Systems Limited [Buyer] objected to the Guanggong Province Zhuhai Intermediate People's Court's civil judgment (2003) Zhu Zhong Fa Min Si Chu Zi Di No. 94 on disputes over the sales contract with Zhuhai Zhongyue New Communication Techology Ltd. Liquidation Group ("Zhongyue") and Zhuhai Taili Lightening Facility Ltd [Seller], and appealed to this Court. The Court formed the collegial bench according to the relevant law to hear the case, and this case was closed.

The [Seller] and Zhongyue had filed a lawsuit with the Court of First Instance alleging that:

   -    The [Seller] is a Sino-foreign equity enterprise; the shareholders of the [Seller] were Zhongyue and the [Buyer], and that Rex Gilfillan, the Chairman of the [Seller], was also the Chairman of the [Buyer].
 
   -    After the [Seller] was established, most of its products were sold to the [Buyer], but the [Buyer] did not make any payment. The [Buyer] owed RMB 4,091,025.51 to the [Seller] as of August 2002.

The [Seller] had filed a lawsuit over this, but Rex Gilfillan, acting as the legal representative of the [Seller], withdrew the complaint. In order to protect the [Seller]'s legal interest, Zhongyue, as a shareholder of the [Seller], filed this shareholder's representation litigation asking the Court to rule that the [Buyer] should pay the [Seller] the contract price of RMB 4,091,025.51 plus interest at the bank's loan interest rate at the same time from 1 October 2002 until the time when the payment is actually made.

[PROCEEDINGS BEFORE THE COURT OF FIRST INSTANCE]

In the first instance, the [Buyer] alleged that

   (1) The [Buyer] had no contractual relation with the [Seller]; in addition, the [Seller]'s lawsuit was filed before the Contact Law of the People's Republic of China took effect, and the Law on Economic Contracts Involving Foreign Interest effective at that time required that the sales contract should be in writing. The [Seller] had no evidence to prove that the [Seller] and the [Buyer] reached an agreement on the price, quality and quantity of the goods, or to prove the [Buyer] had received the goods or to prove quantity and price of the goods received, so the [Buyer] did not owe any contract price to the [Seller].
 
   (2) The statute of limitation on contracts for international sales of goods is four years. The disputes over the contract price in this case arose in 1995, and the [Seller] filed the first lawsuit on 30 August 2002; the [Seller] and Zhongyue's claims for the contract price for the period before 30 August 1998 are time barred.
 
   (3) A shareholder's representation lawsuit requires first exhausting all other remedies. Zhongyue could have resolved these disputes at board meetings; this litigation was filed in bad faith. In addition, this is a shareholder's representation lawsuit, and the [Seller] has not agreed with Zhongyue to file this lawsuit, but the seal in the Complaint is the [Seller]'s.

The Court of First Instance found that in 1994 Zhongyue and the [Buyer] established the [Seller] as a Sino-foreign equity enterprise, and the corporation period was ten years. Zhongyue owned 40% of the [Seller]'s shares, and the [Buyer] owned 60%. The [Seller]'s Board consisted of four directors, of which Zhongyue and the [Buyer] each held two positions; the Chairman of the Board of the [Buyer], Rex Gilfilian, also held the position of Chairman of the Board of the [Seller]. On 6 March 2002, the [Seller] registered the change of company adding Zhuhai Taili Lightening and Audio Design Ltd. as shareholders. Because the registration of change violated the relevant law, Zhuhai Industry and Commercial Bureau revoked the registration.

To require the [Buyer] to pay the contract price, the [Seller] filed a lawsuit against the [Buyer] on 3 November 2002. The Court of First Instance issued its judgment on the case by Civil Order (2002) Zhu Zhong Fa Min Si Chu Zi Di No. 14 on 30 June 2003.

In order to prove the contractual relationship between the [Seller] and the [Buyer], the [Seller] and Zhongyue submitted 84 export tax invoices and 84 photocopies of customs declaration statements. The customs declaration statements were reviewed and approved by customs, and sealed by Gongbei Customs of the People's Republic of China. The [Seller] and Zhongyue asked the Court to review the original documents in Gongbei Customs; the [Buyer] had submitted photocopies. The Court of First Instance reviewed the original customs declaration statements from 25 June 1998 to 26 August 2002 that were filed with Gongbei Customs. The customs declaration statements recorded three types of trade:

   -    general trade,
   -    processing with imported materials, and
   -    processing with imported materials (contracts signed between the corresponding parties).

Processing with imported materials and processing with imported materials (contracts signed between the corresponding parties) are similar, but different from processing with customer's materials, and show that the materials of the exported products are imported.

The [Buyer] and Zhongyue also submitted six bills of lading issued by Hong Kong Hongfeng Transportation Ltd., and 29 bills of lading issued by New Milestone Transportation Ltd., all of which were notarized by a China notary public in Hong Kong, and forwarded by China Legal Service (Hong Kong) Ltd., but this evidence did not prove the quantity and price.

The [Buyer] and Zhongyue referred to the Agent's Opinion in the arbitration, and the Account Statements signed by Zheng Xinyu, Director of the [Buyer] that were submitted in the arbitration to prove that the [Buyer] admitted that it had received the goods delivered by the [Seller], and also admitted the price. The [Buyer], however, denied that the effect of Account Statements signed by Zheng Xinyu, and submitted the affidavit filed by its New Zealand Attorney, Jacqueline Rau Nied (Zheng Xinyu's affidavit filed with New Zealand High Court). In the Affidavit, Zheng Xinyu alleged that the Account Statement signed on 16 July 2001 was not to acknowledge a debt, but to admit that the [Seller] supplied the goods to the [Buyer] in order to resolve the price issue between the [Seller] and the [Buyer], but the parties did not reach an agreement.

After hearing this case, this Court confirmed that the Court of First Instance correctly identified the above facts.

In addition, this Court also identified the following facts:

-      After reviewing the Export Customs Declaration Statements, the Court of First Instance found that the method of payment clearance was clearance after export, and the destination was New Zealand, and the price term was FOB. The purchaser recorded in the export invoices and export merchandise invoices was New Zealand Lightening Facility Ltd. Zheng Xinyu confirmed, in the Affidavit filed with the New Zealand High Court , that many of the goods which the [Buyer] purchased were manufactured by the [Seller], but were not simply imported and then forwarded to the [Buyer].

-      On 27 March 2003, in the arbitration with Zhongyue, the [Buyer], in the Agent's Opinion submitted to CIETAC Shenzhen Sub-Commission, stated:

"The [Buyer] only admitted that the [Buyer] had a sales relationship with the [Seller], but the [Buyer] has never admitted that this sales relationship was established on a written contract; the transactions of goods had no corresponding relation with the alleged contract. Because the actual transactions of goods were different from the forged contract provided by the Chinese party, the [Seller] controlled by the Chinese party filed the lawsuit requesting the [Buyer] to pay the outstanding amount.

"The above sales contract itself cannot prove that the [Buyer] had actually received the goods according the sales contract, because the [Seller], as a cooperative enterprise, should complete some export task. Therefore, there may be some forged part in the sales contract. In addition, the [Seller] exported the goods through the [Buyer] to other customers in the international market. Thus, although the [Buyer]'s name was in the contract, the final beneficiary was not the [Buyer]."

-      On 19 September 2003, the [Buyer], in the Objection to Jurisdiction II, stated that

"The [Buyer] supplied to the [Seller], and the [Seller] received the following goods: (1) part of the goods were through the [Buyer] to the final purchaser ... (2) part of the goods were supplied by the [Seller] to the [Buyer] for free in order to offset the dividends which the [Buyer] should receive."

The Court of First Instance held that the contract in this case involved a foreign interest; however, the place of performance was in Zhuhai, China. According to Article 243 of the Law of Civil Procedure of the People's Republic of China, the Court of First Instance had jurisdiction over this case. The parties did not stipulate the applicable law, and according to Article 45(2) of the Law of Civil Procedure of the PRC, the laws of the PRC, i.e., the law of the most proximate connection, should apply. However, Article 184 of the Supreme People's Court's Opinions on Questions of Implementing the Law of Civil Procedure of the PRC states, "The capacity of a foreign legal person shall be determined by the law of the nation in which the foreign legal person is registered." Therefore, the [Buyer]'s civil capacity shall be determined by the law of New Zealand.

As to whether this litigation satisfies the conditions for a shareholder's representation lawsuit, the [Seller]'s governance was special; the [Seller] (including its seal) was actually controlled by Zhongyue; the [Seller]'s legal representative was the [Buyer]'s legal representative; the change of ownership was in dispute; the [Seller] could not hold board meetings or shareholders meetings. The [Seller] had filed a lawsuit in its own name to claim the contract price from the [Buyer], but it withdrew the lawsuit because the legal representative objected, and the Court ordered the dismissal of the [Seller]'s lawsuit. Under this circumstance, it should be determined that the [Buyer] had already exhausted all possible legal methods. Because Zhongyue actually controlled the [Seller]'s seal, the Complaint was stamped with the [Seller]'s seal, but this did not mean the [Seller] could complete the lawsuit on its own name.

This is a shareholder's representation lawsuit. Zhongyue and the [Seller] alleged that the basic legal relation in this case has nothing to do with international sales of goods. According to the export invoices, customs declaration statements, bills of lading, and shipping documents submitted by the [Buyer] and Zhongyue, and Zheng Xinyu's Affidavit filed with New Zealand High Court on 25 July 2003 submitted by the [Buyer], the parties had a contractual relationship for sales of goods. The [Seller] actually supplied the goods to the [Buyer]; the absence of a written contract did not necessarily deny the existence of the sales relationship between the parties. The [Buyer] alleged that the goods received were based on the dividends of the [Seller], but did not provide any evidence to prove the [Seller] had distributed dividends. According to Article 2 of the Supreme People's Court's Regulation on Evidence in Civil Litigation, the [Buyer] should bear the burden of proof when objecting to the counter party's claims, so the [Buyer]'s allegation that the parties had no international sales relationship was not sustained.

As to the quantity and price of the goods, the customs declaration statements recorded the exported subject, price and quantity of the goods, and the export invoices, customs declaration statements, bills of lading and shipping documents could also prove that the [Seller] exported the goods to the [Buyer]. Although the [Seller] and the [Buyer] did not sign a written contract stipulating the quality and price, the Court of First Instance held that the quantity and price recorded in export invoices and customs declaration statements could be admitted, because:

   (1)   As to the quantity of the goods, the export invoices were supervised by the tax bureau, and the customs declaration statements were confirmed by the Customs after the goods were examined;
 
   (2)   As to the price of the goods, because the parties did not stipulate, according to Article 62(2) of the Contract Law of the People's Republic of China, if the price or consideration is not definite, it should be determined by the market price at the performance of the contract, and the price declared by the [Seller] to the Customs should be supervised by the Customs and, should comply with the market price of the performance place of the contract;
 
   (3)   Although the [Buyer] objected to the price, it accepted the goods delivered by the [Seller], and did not raise objection in writing. However, the [Seller] and Zhongyue did not submit sufficient evidence to prove the foreign exchange rate between US dollars and RMB.

Regarding the Statute of Limitation issue, Article 129 of the Contract Law of the PRC stipulates:

"The time limit for action before the people's court or for arbitration before an arbitration institution regarding disputes relating to contracts for international sales of goods and contracts for technology import and export shall be four years, calculating from the date on which the party knows or ought to know the infringement on its rights ..."

The [Seller]'s claim was governed by the above statute of limitation. The record showed that the [Seller] filed a lawsuit against the [Buyer] on 3 November 2002 requesting the [Buyer] to pay the contract price, so the statute of limitation was suspended on 3 November 2002. The [Seller]'s claims for the contract price incurred before 3 November 1998 were time barred, so the Court did not sustain them. The evidence showed that after 3 November 1998, the [Seller] exported 56 installments of goods to the [Buyer] from 16 November 1998 to 26 August 2002, totaling US $281,710 and Hong Kong $14,441.

As to interest, the [Seller] request the [Buyer] to pay the interest calculating from the time when this lawsuit was filed to the day when the actual payment is made at the bank's loan interest rate over that period of time. The parties did not stipulate the time of payment; Article 63(4) of the Contract Law of the PRC states:

"If the time limit for performance is unclear, the obligor may at any time fulfill the obligations towards the obligee; the obligee may also demand at any time that the obligor performs the obligations, but a time period for necessary preparation shall be given to the obligor."

The [Seller] filed a lawsuit against the [Buyer] for the contract price on 3 November 2002, which was deemed that the [Seller] demanded that the [Buyer] perform the duty of payment. The interest on the outstanding amount should be calculated from 1 January 2003 to the time when the payment is actually made.

In sum, the Court of First Instance held that the [Seller] and the [Buyer] had a contractual relationship, and that the [Buyer] should pay the [Seller] the contract price. According to Articles 109, 129 and 62(4) of the Contract Law of the PRC, the Court of First Instance ruled that the [Buyer] should pay the [Seller] the contract price of US $281,710 and Hong Kong $14,441 plus interest (calculated from 1 January 2003 to the time when the payment is actually made, at the China People's Bank's short term loan interest rate for that period of time); otherwise, it should be implemented according to Article 232 of the Law of the Civil Procedure of the PRC. The litigation fee was RMB 31,190.13, of which Zhongyue should pay RMB 10,396.13 and the [Buyer] should pay RMB 20,794.

[POSITION OF THE PARTIES ON APPEAL]

[Buyer's position]

The [Buyer] objected to the judgment of the Court of First Instance, and appealed to this Court requesting the Court to (1) revoke the judgment of the Court of First Instance; (2) dismiss the claims of the [Seller] and Zhongyue; and (3) rule that the [Seller] and Zhongyue should pay the litigation fee. The [Buyer] provided the following reasons.

1. The Court of First Instance mistakenly held that the [Buyer] had already received the goods alleged by the [Seller] and Zhongyue.

      (1) During the investigation process at the first instance, the [Buyer] objected to the jurisdiction of the Court and raised the issue whether the goods in this case were dividends distributed by the [Seller]. During the hearing, the [Buyer] stated many times that it did not receive the goods disputed in this case, but the Court of First Instance mistakenly explained the [Buyer]'s opinions in the Defense, and mistakenly held that the [Buyer] received the goods;

      (2) Zheng Xinyu had never, in the Affidavit filed with New Zealand High Court, admitted that the [Buyer] and the [Seller] had a sales relationship. Moreover, even if it could be proved that the [Seller] and the [Buyer] had a sales relationship, it could not be proved that the goods which the [Buyer] received were those disputed in this case;

      (3) The customs declaration statements were only certificates to prove that the [Seller] declared the export to Customs; these statements could neither prove that the [Seller] and the [Buyer] had a sales relationship, nor could they prove that the [Buyer] received the goods disputed in this case;

      (4) According to customs on international sales of goods, the seller should issue commercial invoices to the buyer when loading the exported goods so that the buyer could receive the goods, record in the account statement, make the payment, complete customs clearance, and pay the duty. The [Seller] did not provide commercial invoices; the [Buyer] alleged that the export invoices which the [Seller] submitted were only certificates to prove that it had paid duty to the tax bureau.

      (5) No evidence was submitted to prove that the [Buyer] had received the bills of lading. The consignee in part of the bills of lading was Hong Feng Shipping Company, but not the [Buyer]; part of the bills of lading were "received for shipping B/L", and part of the bills of lading were air B/L. These bills of lading could not prove that the [Buyer] had received the goods.

2. The Court of First Instance mistakenly calculated the contract price based on the quantity and price recorded in the export invoices and customs declaration statements.

      (1) The [Seller] only submitted 35 bills of lading, which did not correspond to the customs declaration statements and export invoices. Customs could not count all goods under the declaration statements; moreover, even if the Customs counted all goods, it could only prove that the goods were shipped out of China, but could not prove that the [Buyer] had received the goods;

      (2) The [Seller]'s customs declaration statements might only be used to fulfill the export obligation and obtain tax refund by fraud; the [Buyer] had asked the Court of First Instance to review the [Seller]'s receipt of foreign currency recorded in Zhuhai Foreign Currency Supervision Bureau, and request the employees of Zhuhai Yong An Da Accounting Firm, as the auditor of the [Buyer]'s annual statement in 2003, to respond to the inquiry in the court session; however, the Court of First Instance ignored the [Buyer]'s above requests.

      (3) According to the Law on Contracts Involving Foreign Interest, which was effective during the transactions in this case, contracts for the international sale of goods should be in writing; the [Seller] provided the contract when doing the customs declaration; the Court of First Instance had required the [Seller] to submit the written contracts, otherwise, it would rule against the [Seller].

      (4) Zhongyue's agent also represented the [Seller], which was not consistent with the law; this would damage the [Buyer]'s and the [Seller]'s interest. Zhongyue's business license had been revoked for many years, but it did not go through the liquidation process; therefore, Zhongyue's registration should be cancelled; Zhongyue's liquidation group was not consistent with the law. The [Seller]'s claims based on the same facts, reasons and subjects were dismissed, so it could not be a party in this case.

4. The Court of First Instance mistakenly applied the law.

      (1) The Court of First Instance determined that this was a contract for international sales of goods, so the laws of the PRC, United Nations Convention on Contracts for International Sales of Goods (CISG), and INCOTERMS should apply.

      (2) The Court of First Instance mistakenly determined that the contract price was the price after export duty;

      (3) Both the place of performance and the [Buyer]'s business place are in New Zealand, so the laws of New Zealand should apply;

5. The Court of First Instance had no jurisdiction over this case. The [Seller] had the contracts, but did not submit them, so the Court of First Instance should have ruled against the [Seller] on jurisdiction. Both of the two most proximate connections of the contracts were in New Zealand, so the courts in New Zealand should have jurisdiction;

6. The Court of First Instance voluntarily went to the Customs to review the customs declaration statements, which violated the Supreme People's Court Regulations on Evidence.

[Seller's response to Buyer's appellate pleadings]

As to the [Buyer]'s appeal, the [Seller] and Zhongyue alleged in their Defense:

1. The Court of First Instance determined that the [Buyer] had already received the goods delivered by the [Seller], and that the parties had entered into an international sales contract. This determination was based on correctly identified facts and sufficient evidence.

      (1) The [Buyer]'s evidence could be rebutted and constituted an incomplete line of evidence.

      (2) Although the written contracts were not submitted, the [Seller] and the [Buyer] had a sales contract relationship.

      (3) Zheng Xinyu's Affidavit and the Agent's Opinions submitted by the [Buyer] objectively proved that the [Seller] and the [Buyer] had a sales relationship, which constituted a self-admission.

      (4) The [Buyer]'s statements regarding whether it had received the goods were contradictory.

2. The Court of First Instance legally and reasonably determined the quantity and price of the goods.

      (1) The Customs sealed the customs declaration statements after reviewing and finding no mistake; the price term recorded in the customs declaration statements was FOB; the [Seller] completed its duty of delivery once it delivered the goods to the [Buyer].

      (2) There was no necessary connection between the issuance of the commercial invoices and the receipt of the goods.

      (3) The [Buyer]'s allegation that the [Seller] obtained export duty refund by fraud lacked any basis.

3. Zhongyue filed this lawsuit according to the principles of a shareholder's representation lawsuit, and had litigation capacity. The [Buyer]'s first lawsuit did not get a substantive hearing, so it did not lose the right to litigate.

4. The Court of First Instance had jurisdiction. The disputes in this case were related to international sales of goods. Zhuhai, China, was the [Seller]'s place of business and the place of performance. The [Buyer], in the first instance, only raised objection to whether the disputes should be submitted for arbitration or litigation, and did not appeal when its objection was dismissed. The [Buyer] neither stated that foreign courts had jurisdiction over this case nor filed a defense, so it was deemed that the [Buyer] had accepted that the Court of First Instance had jurisdiction. In addition, according to the law, an objection to jurisdiction should be filed during the defense period in the first instance; the [Buyer] raised the objection to jurisdiction in the second instance, which obviously exceeded the legal period.

5. The laws of the People's Republic of China should apply to this case. According to Supreme People's Court's Response to Questions Regarding the Application of the Law of Contracts Involving Foreign Interest, the laws of the seller's place of business at the time of conclusion of the contract should apply to a contract for the international sale of goods. Although the above Response had been cancelled, it showed that the principle of most proximate connection was determined in China's legal practice. Even if the CISG applies, the Contract Law of the PRC is almost consistent with international law and the CISG.

6. The procedure at the first instance was consistent with the law. In the court session of the first instance, the [Buyer] expressed that it did not object to the customs declaration statements; after the court session, the [Buyer] submitted the Agent's Opinions alleging that there were 28 customs declaration statements which were not clear to read. After the Court of First Instance investigated and reviewed the evidence, the [Buyer], in the second instance, alleged that this violated the law, and that the Court of First Instance assisted the [Seller] to obtain the evidence; this allegation was unjustified.

7. The rejection by the Court of First Instance of the account statements signed by Zheng Xinyu was not justified. The Court of First Instance mistakenly determined the issue of statute of limitation.

In sum, it is the [Seller]'s position that the Court of First Instance correctly determined that the [Buyer] had received the goods, and the parties had a sales relationship, and correctly determined the contract price; the facts were definitely identified, and the laws were correctly applied, so the judgment of the Court of First Instance should be sustained. However, the Court of First Instance mistakenly determined the issue on statute of limitation, so the [Seller] request this Court to review this case and hand down a fair judgment.

[HOLDING OF THE APPELLATE COURT]

This Court holds that the disputes in this case are related to contracts for the international sale of goods. The customs declaration statements submitted by the [Seller] and Zhongyue showed that the price term was FOB; the place of performance of the contracts was in Zhuhai, so according to Article 243 of the Law of Civil Procedure of the PRC, the Court of First Instance had jurisdiction over this case. This Court does not sustain the [Buyer]'s allegation that the Court of First Instance had no jurisdiction, because it lacked legal basis.

In this case, Zhongyue and the [Buyer] jointly set up the Sino-foreign equity enterprise, i.e., the [Seller]. The [Buyer] owned 60% of the shares, and its legal representative held the position of Chairman of the [Seller]. The [Seller] had filed a lawsuit against the [Buyer] before the Court of First Instance in 2002 based on the sales contracts; however, because its legal representative objected, the Court of First Instance dismissed the lawsuit because the legality of the [Seller]'s lawsuit could not be determined. According to the Supreme People's Court's Response to the Inquiries Regarding on Whose Name the Chinese Party could File a Lawsuit before the People's Court Based on the Disputes on Economic Contracts of Sino-Foreign Equity Enterprises When the Controlling Foreign Party has a Relationship with the Seller, Zhongyue had the right to file the lawsuit. Under this circumstance, the [Seller] filed the lawsuit again with Zhongyue's assistance, which did not constitute lis alibi pendens. This Court does not sustain the [Buyer]'s allegation that the [Seller]'s right to litigate was extinguished, because it lacked legal basis. Zhongyue's business license had been revoked, and the liquidation group was formed; it was the liquidation group that exercised Zhongyue's civil rights. This Court does not sustain the [Buyer]'s allegation that Zhongyue's appeal lacked legal basis. Zhongyue and the [Seller] were joint Plaintiffs, and a joint Plaintiffs could retain one agent, which did not violate the law, so the [Buyer]'s objection lacked basis. In the first instance, the [Seller] and Zhongyue provided photo copies of customs declaration statements; the original statements were filed in Gongbei Customs, so the Plaintiffs requested the Court to review the original. Because the photocopies were not clear, the Court of First Instance reviewed the statements in Gongbei Customs as per the Plaintiffs' request, which did not violate the law.

The [Seller] and the [Buyer] did not stipulate the applicable law. Because both [Seller]'s place of business and the place of performance were in Zhuhai; according to the principle of the most proximate connection, the laws of the PRC should apply. The [Seller]'s place of business and the [Buyer]'s place of business were in China and New Zealand, respectively. Both China and New Zealand are Contracting States of the CISG. According to Article 142(2) of the Law of Civil Procedure of the PRC, if the stipulations of an international convention, of which China is a member, are different from the civil law of the PRC, the international convention should apply unless China declares a reservation. Therefore, the CISG should apply to this case.

In this case, the [Seller] and Zhongyue did not provide sales contracts to the [Buyer]. The [Buyer] denied the existence of sales contractual relationship with the [Seller], and denied that it had received the goods disputed in this case, but the [Buyer] admitted, in the arbitration, that it had a sales relationship with the [Seller]. However, the [Buyer] alleged that the actual sales did not correspond to the written contract provided by Zhongyue. Zheng Xinyu, in the Affidavit, admitted that the [Seller] and the [Buyer] had a sales relationship, but the parties did not stipulate the price. The Court of First Instance correctly determined that the [Seller] and the [Buyer] had a sales contractual relationship, so this Court sustained determination.

The [Buyer] admitted that it had received goods supplied by the [Seller], but denied that it had received the goods alleged by Zhongyue and the [Seller] in this case. Because the [Buyer] and the [Seller] had an investment relationship, the transactions between the parties were not regular. The export invoices and customs declaration statements submitted by the [Seller] and Zhongyue were consistent, so they could be admitted as initial evidence to determine the quantity and price of the goods. The [Buyer] denied that it had received the above goods, so the [Buyer] should provide the contrary evidence to prove that the quantity and price of the goods received were different from that alleged by the [Seller] and Zhongyue, but the [Buyer] did not provide such evidence; the [Buyer] only generally denied the [Seller] and Zhongyue's allegation, which was inconsistent with its statement that the [Seller] and the [Buyer] had a sales relationship. The price and quantity determined by the Court of First Instance based on the evidence submitted by the [Seller] and Zhongyue was not inappropriate, so this Court sustains that determination. As to the [Buyer]'s allegation that the [Seller] obtained its duty refund by fraud, because the [Buyer] did not provide any relevant evidence, this Court does not sustain that allegation.

The [Seller] and Zhongyue raised objection to the rejection of the account statement signed by Zheng Xinyu for the Court of First Instance, and the issue of statute of limitation, but did not appeal this, so this Court did not review this objection.

[JUDGMENT]

In sum, the Court of First Instance correctly identified the facts, and determined the application of law, so this Court sustains that. Because the [Buyer]'s appeal was not justified, this Court dismissed the [Buyer]'s appeal. According to Article 152(1) Item 1 of the Law of Civil Procedure of the PRC, this Court hands down the following judgment:

   -    The [Buyer]'s appeal is dismissed; the judgment of the first instance is sustained;
 
   -    The litigation fee of the second instance was RMB 31,190.13, which the [Buyer] should bear.

This is the final judgment.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of the People's Republic of China is referred to as [Seller]; Theaterlight Electronic Control & Audo System Ltd of New Zealand is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

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Pace Law School Institute of International Commercial Law - Last updated May 12, 2010
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