CASE LAW DRAFT NO. 16/2024 On the Determination of Civil Disputes on Asset Reclamation (Please note that this image is not related to the specific case being discussed)

CASE LAW DRAFT NO. 16/2024

On the Determination of Civil Disputes on Asset Reclamation

Approved by the Judges’ Council of the Supreme People’s Court on [date] [month] 2024 and published under Decision No. [number]/QĐ-CA on [date] [month] 2024 by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Cassation Decision No. 13/2022/KDTM-GĐT dated December 12^th, 2022, of the Judges’ Council of the Supreme People’s Court concerning the case of “Service Contract Dispute” between the plaintiff, M Company, and the defendant, A Joint Stock Company.

Location of the Case Law’s Content:

Paragraphs 5 and 6 of the “Court’s Opinion” section.

Summary of the Case Law:

– Factual Background:

The parties entered into and executed a service contract, subsequently agreeing to terminate the contract. The plaintiff (service provider) demanded the defendant (service user) to pay for the services rendered. The defendant agreed to pay but had not done so, leading the plaintiff to file a lawsuit in court demanding payment for the services. The defendant requested the application of the statute of limitations, arguing that the time limit for initiating legal action had expired.

– Legal Resolution:

In this situation, the Court must determine that the dispute between the parties is a civil dispute over asset reclamation and should not apply the statute of limitations for initiating legal action.

Relevant Legal Provisions:

Clause 2, Article 155 of the 2015 Civil Code.

Keywords:

“Service Contract”; “Asset Reclamation”; “Non-application of Statute of Limitations.”

CASE DETAILS

According to the Complaint dated November 26^th, 2018, and during the case proceedings, the plaintiff, M Company, presented:

On July 1^st, 2012, M Company and A Paper Joint Stock Company (hereinafter referred to as A Company) signed a service contract, whereby M Company would dispatch technical experts to provide services and technical guidance related to the production of Kraft pulp for A Company, based on the agreement of both parties and Japanese law (Article 9 of the Contract).

From July 2012 to November 2012, M Company dispatched a total of 4 technical experts to A Company’s factory.

On November 2^nd, 2012, A Company sent Document No. 319/AHP-HCNS to M Company proposing to terminate the service contract. On November 23^rd, 2012, M Company agreed, and the service contract was terminated on November 23^rd, 2012.

Based on the work performed and in accordance with the agreement in Article 4 of the service contract, M Company issued a total of 6 commercial invoices for the service fees payable from July 2012 to November 2012 and the costs incurred after November 2012, specifically:

After M Company issued the commercial invoices, A Company raised no objections regarding the content of these invoices.

Meetings were held between M Company and A Company on December 8^th, 2012, and March 27^th, 2013. During both meetings, the Chairman of the Board of Directors of A Company confirmed that the company would pay M Company according to the service contract.

On June 1^st, 2013, A Company sent Document No. 10/AHP-MC-2013 to M Company, once again confirming: “Based on the confirmation by our Chairman, we hereby affirm that A Company will pay the service fees to M Company.”

M Company continuously demanded payment from A Company by sending documents and letters to A Company (such as the On-site Exchange Document No. SC-MC/AHP-2839, SC-MC/AHP-2842, and payment request letters on November 15^th, 2017, and May 23^rd, 2018).

However, A Company has not made any payments for the fees and costs under the service contract, specifically JPY 26,343,433 according to the commercial invoices.

A Company is obligated to make the payment as stipulated in Article 4 of the service contract. The payment deadlines are as follows:

Due to A Company’s violation of the payment obligation, they must pay late interest at the rate of 10% per annum as per Article 3.5 of the service contract.

The plaintiff requests the Court to compel A Company to pay the amount according to the commercial invoices of JPY 26,343,433 and the late interest calculated up to November 26^th, 2018, amounting to JPY 15,596,274. Converted to Vietnamese Dong, this is equivalent to VND 8,762,510,504.

Defendant’s Statement:

The defendant, A Paper Joint Stock Company, stated that they do not agree with the lawsuit request of M Company because the statute of limitations for initiating legal action has expired. They requested the Court to apply the statute of limitations provisions to dismiss the case.

Court’s Decision:

In the Decision to Dismiss the Business and Commercial Case No. 01/2019/QĐST-KDTM dated November 30^th, 2019, the People’s Court of Tuyên Quang Province decided to:

Dismiss the business and commercial case No. 01/2019/TLST-KDTM dated January 7^th, 2019, regarding the “Service Contract Dispute” between the plaintiff, M Company, and the defendant, A Paper Joint Stock Company.

Consequences of Suspending Case Resolution:

The litigant is not entitled to refile a lawsuit requesting the Court to resolve the matter.

Return to M Company the entire amount of the business and commercial first-instance court fee advance of VND 58,381,255 paid as per Receipt No. 0000507 dated January 7^th, 2019, by the Tuyên Quang Provincial Civil Judgment Enforcement Department (submitted on behalf of the plaintiff by Branch of Q Law Firm).

Return to the plaintiff the complaint and the accompanying documents (if requested).

On December 6^th, 2019, M Company filed an appeal.

In the Decision on the Appeal Settlement against the Decision to Dismiss the Case No. 37/2020/QĐ-PT dated May 6^th, 2020, the High People’s Court in Hà Nội decided:

To dismiss the appeal of M Company and to uphold the Decision to Dismiss the Business and Commercial Casee No. 01/2019/QĐST-KDTM dated November 30^th, 2019, by the People’s Court of Tuyên Quang Province.

Additionally, the appellate court also ruled on court fees.

On August 21^st, 2020, M Company submitted a petition for review under the cassation procedure against the aforementioned appellate decision.

In the Cassation Appeal Decision No. 24/2021/KN-KDTM dated December 23^rd, 2021, the Chief Justice of the Supreme People’s Court lodged a appeal against the Decision on the Appeal Settlement against the Decision to Dismiss the Case No. 37/2020/QĐ-PT dated May 6^th, 2020, by the High People’s Court in Hà Nội;

requested the Judges’ Council of the Supreme People’s Court to conduct a cassation trial, vacate the aforementioned appellate business commercial decision, and vacate the Decision to Dismiss the Business and Commercial Case No. 01/2019/QĐST-KDTM dated November 30^th, 2019, by the People’s Court of Tuyên Quang Province; and remand the case file to the People’s Court of Tuyên Quang Province for re-trial according to first-instance procedures in compliance with the law.

At the cassation trial, the representative of the Supreme People’s Procuracy concurred with the appeal of the Chief Justice of the Supreme People’s Court.

COURT’S OPINION:

[1] On July 1^st, 2012, M Company and A Company signed a service contract whereby M Company would send technical experts to provide services and technical guidance related to A Company’s Kraft pulp production, based on the agreement between the two parties and Japanese law (Article 9 of the contract).

[2] From July 2012 to November 2012, M Company sent a total of four technical experts to A Company’s factory. On November 2^nd, 2012, A Company sent M Company Document No. 319/AHP-HCNS requesting to terminate the service contract. On November 23^rd, 2012, M Company and A Company agreed to terminate the service contract effective November 23^rd, 2012.

[3] M Company issued six commercial invoices for service fees payable from July 2012 to November 2012 and post-November 2012 expenses, totaling JPY 26,343,433. A Company was obligated to pay the final invoice by March 31^st, 2013.

[4] On June 1^st, 2013, A Company, through Vice General Director Phan A1, issued Document No. 10/AH-MC-2013 reaffirming that A Company would pay M Company the service fees as agreed in the meeting on May 31^st, 2013, specifically: “Following the confirmation by our Chairman, we hereby reaffirm that A Company will pay the service fees to M Company. The payment will be made immediately after the expenses incurred by both parties are settled and agreed upon.”

[5] Thus, the parties agreed to terminate the contract execution, and A Company acknowledged its obligation to pay the commercial invoices totaling JPY 26,343,433 and the late payment interest. Therefore, M Company’s lawsuit requesting the Court to compel A Company to pay the aforementioned amount should be considered a civil dispute over asset reclamation. The first-instance and appellate courts’ determination that the legal relationship was a commercial contract dispute, “Service Contract Dispute,” was incorrect.

[6] According to Clause 2, Article 155 of the 2015 Civil Code, this case does not apply the statute of limitations for filing a lawsuit. The first-instance and appellate courts did not fully and accurately evaluate the above case details, thus accepting A Company’s request to apply the statute of limitations under Clause 2, Article 184 of the 2015 Civil Procedure Code, leading to the application of Point e, Clause 1, Article 217 of the Civil Procedure Code to decide to suspend the case resolution, which is unlawful.

In light of the foregoing,

IT IS DECIDED:

Pursuant to Point a, Clause 2, Article 337; Clause 3, Article 343; and Article 345 of the 2015 Civil Procedure Code;

The Cassation Appeal Decision No. 24/2021/KN-KDTM dated December 23^rd, 2021, by the Chief Justice of the Supreme People’s Court is ACCEPTED.

Furthermore, the Decision on the Appeal Settlement against the Decision to Dismiss the Case No. 37/2020/QĐ-PT dated May 6^th, 2020, by the High People’s Court in Hà Nội, and the Decision to Dismiss the Case No. 01/2019/QĐST-KDTM dated November 30^th, 2019, by the People’s Court of Tuyên Quang Province, regarding the business and commercial case “Service Contract Dispute” between the plaintiff, M Company, and the defendant, A Paper Joint Stock Company, are both VACATED.

The case file is hereby REMANDED to the People’s Court of Tuyên Quang Province for re-trial according to first-instance procedures in compliance with the law.

The cassation decision is legally effective from the date of issuance.

CONTENT OF THE CASE LAW:

“[5] … the parties agreed to terminate the contract execution, and A Company acknowledged its obligation to pay the commercial invoices totaling JPY 26,343,433 and the late payment interest. Therefore, M Company’s lawsuit requesting the Court to compel A Company to pay the aforementioned amount should be considered a civil dispute over assets reclamation. The first-instance and appellate courts’ determination that the legal relationship was a commercial contract dispute, “Service Contract Dispute,” was incorrect.”

THE RATIONALE FOR THE CASE LAW DRAFT’S PROPOSAL

Commercial contracts are governed by commercial law. In practice, many cases arise where the parties agree to terminate the commercial contract and settle debts with each other but later dispute the debt payment.

Disputes over debt payment like the above are considered commercial disputes (governed by commercial law) or civil disputes over asset reclamation (governed by civil law, which includes provisions on the non-application of the statute of limitations for filing lawsuits). There are still many different viewpoints on this issue, and judicial practice at the Courts and Arbitration centers is often confused.

The case brought forward in this draft case law is an example of the confusion and differing viewpoints when the local court’s and the Supreme Court’s resolutions differ. Therefore, developing case law on this issue to guide the uniform application of the law in similar legal situations is necessary.

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