Hanoi-Vietnam: Precedent No. 12/2017/AL


Precedent No. 12/2017/AL on determining the case where involved parties are lawfully summoned for the first time after the Court has adjourned the hearing

Adopted by the Judicial Council of the Supreme People's Court of Vietnam on December 14, 2017 and publicized according to Decision No. 299/QD-CA dated December 28, 2017 of the Chief Justice of the Supreme People's Court of Vietnam.

Source of Precedent:

Cassation Decision No. 14/2017/KDTM-GDT dated June 6, 2017 of the Judicial Council of the Supreme People's Court of Vietnam regarding a commercial case on "Disputes over contract for sale and purchase of goods" in Quang Tri province between the plaintiff, Joint Stock Company Q (legal representative Mr. Dang Cong D, authorized representative Mr. Ho Nghia A) and the defendant, Limited Liability Company T (legal representative Mr. Vo Van T, authorized representative Mrs. Vo Thi T).

Location of the Precedent Content:

Paragraph 1 of the "Court's Opinion" section.

Summary of the Precedent:

- The Context of the Precedent:

The Court decided to adjourn the hearing and the reason for the adjournment was not due to the fault of the involved parties (plaintiff, defendant, person with related interests and obligations) or their representatives, legal representatives, protectors of their legitimate rights and interests. The hearing was reopened but there was a lawful absence of one or more of the involved parties or their representatives, protectors of their legitimate rights and interests who were lawfully summoned.

- Legal Solution:

The Court must determine this as the case where the involved party or their representative, protector of legitimate rights and interests is lawfully summoned for the first time and is absent at the hearing.

Legal provisions related to the Precedent:

Clause 1 of Article 199, Article 202, Clause 2 of Article 266 of the 2004 Civil Procedure Code (Clause 1 of Article 227, Article 228, Clause 2 of Article 296 of the 2015 Civil Procedure Code).

Keywords of the Precedent:

"Lawful Summon"; "First-time Lawful Summon"; "involved party's absence at Hearing"; "Adjournment of Hearing".

CASE CONTENT:

In the Lawsuit Petition dated November 5, 2012; Amendment and Supplement Petition dated May 26, 2013 and testimonies at the Court, the plaintiff, Joint Stock Company Q, presented.

On January 3, 2011, Joint Stock Company Q (hereinafter referred to as Company Q) and Limited Liability Company T (hereinafter referred to as Company T) signed the contract for sale and purchase of Rubber Seedling No. 011/2011/HDKT; on February 23, 2011, the two parties continued to sign Contract No. 021/2011/HDKT with the same content. The total number of seedlings of the two contracts was 400,000 rubber seedlings (each contract 200,000 seedlings, valued at 1,400,000,000 Lao Kip per contract). After signing the contract, Company Q advanced Company T 930,000,000 Lao Kip (equivalent to 2,511,000,000 VND).

During the implementation of the contract, Company T requested to borrow 449,455 bare-root seedlings, which was accepted by Company Q, who purchased the seedlings from Company V at 6,500 VND/seedling. Company T returned 40,600 seedlings to Company Q and still owed 408,855 seedlings. During the first delivery, Company T only delivered 79,924 seedlings and then did not fulfill the contract. Company Q repeatedly invited Company T to resolve the matter, but Company T did not attend. On October 5, 2011, Mr. Vo Van T sent his daughter, Mrs. Vo Thi T, to work on the matter. To minimize losses, Company Q conducted an inventory of the total number of seedlings. As of September 14, 2011, the total was 194,776 seedlings, but this was just an inventory number, not a delivery number. If considering the delivery completed in September 2011, the delivery quantity only met 20% of the total payment that Company T had received in advance from Company Q. Hence, Company Q agreed with Mrs. Vo Thi T to send workers for the second round to utilize and dig 117,833 seedlings, raising the total delivered to 197,757 bare-root seedlings, equivalent to a total value of 3,623,897,000 VND.

Additionally, Company Q lent Company T various supplies and fertilizers worth a total of 243,913,211 VND, which Company T has not yet returned.

Company T delivered to Company Q 163,376 processed pots of soil, valued at 39,414,000 Lao Kip, equivalent to 105,629,500 VND; a wooden nursery valued at 20,491,200 Lao Kip, equivalent to 54,916,000 VND and 18,096,000 VND; totaling 178,641,500 VND. Company Q now requests the Court to:

- Compel Company T to compensate for damages due to breach of obligations in the two contracts mentioned above, with the total number of seedlings not delivered being 202,243 seedlings (valued at 3,706,102,975 VND). According to the contract, a breach incurs a penalty of 05 times the value of undelivered seedlings, equaling 18,530,514,875 VND;

- Compel Company T to return 408,855 borrowed bare-root seedlings, valued at 2,657,557,500 VND;

- Compel Company T to return the borrowed supplies from Company Q, including: 5,170kg PE bags (18 x 40), 500kg potassium fertilizer, 1,000kg DAP fertilizer, 2,800kg phosphate fertilizer, with a total value of 91,212,392 Lao Kip, equivalent to 243,913,211 VND.

At the hearing, Company Q requested only a penalty for breach of contract at 8% of the value of the undelivered seedlings, totaling 296,488,000 VND. Hence, Company T must pay Company Q a total of 3,088,822,500 VND. After offsetting the amount that Company Q has to pay to Company T of 1,367,934,000 VND, Company T still owes Company Q 1,720,888,500 VND.

The defendant, Limited Liability Company T presented:

Acknowledging the contract details as Company Q presented. Company T had fulfilled the contract, but when the delivery time arrived, Company Q postponed receiving the seedlings, citing insufficient workers and no transport. A representative of Company Q indicated that their rubber planting plan at that time had been reduced in planting area compared to previous years, hence not knowing where to plant the seedlings received. As a result, Company Q only received the first batch of 79,924 seedlings on July 19, 2011, and finished transporting these on September 21, 2011. Company T repeatedly requested Company Q to pick up the remaining seedlings, but Company Q did not do so. In early September 2011, Company Q agreed to send its technicians to inspect the remaining seedlings on September 14, 2011, to check if they were usable, then store them at Company T's nursery until they had a plan to plant them. The inspected seedlings numbered 194,766, combined with the first batch of 79,924, totaling 274,690 seedlings. The seedlings that remained uncollected by Company Q and eventually died amounted to 125,310 seedlings. Therefore, for the total of 400,000 seedlings of the two contracts, Company T had delivered in full. The fault of not picking up the seedlings leading to their deaths lies with Company Q. The obligations of the two contracts were fulfilled by Company T, and Company Q repeatedly refused to pay the remaining amount.

Company Q advanced Company T 930,000,000 Lao Kip for the two contracts, equivalent to 2,511,000,000 VND, and the borrowed supplies worth 91,212,392 Lao Kip. Thus, Company T must reimburse Company Q 1,021,212,392 Lao Kip, equivalent to 2,757,273,454 VND.

The total value of the two contracts successfully fulfilled by Company T was 2,800,000,000 Lao Kip. Company Q received Company T's wooden nursery valued at 20,491,200 Lao Kip and 18,096,000 VND. The PE bags received by Company Q in the first batch were valued at 32,865,000 Lao Kip, the second batch at 7,875,000 Lao Kip, and the labor for the processed soil was valued at 39,406,291 Lao Kip. Thus, the total payable by Company Q to Company T was 2,900,637,491 Lao Kip, equivalent to 7,831,721,225 VND. After mutual obligations were offset, Company T counterclaimed that Company Q must pay 1,879,425,009 Lao Kip (equivalent to 5,074,447,767 VND) and 18,096,000 VND; totaling 5,092,543,767 VND.

At the hearing, Company T only requested the following payments:

- The value of 400,000 seedlings completed under the contract was 1,870,000,000 Lao Kip (after deducting 930,000,000 Lao Kip advanced by Company Q), equivalent to 4,895,288,000 VND;

- The value of the wooden nursery was 20,491,200 Lao Kip, equivalent to 53,642,000 VND, and 18,096,000 VND;

- The value of 163,376 processed soil pots was 39,414,000 Lao Kip, equivalent to 103,158,000 VND. The total amount Company T requested Company Q to pay was 4,967,026,000 VND;

- Regarding 449,455 seedlings borrowed from Company Q, Company T had returned 40,600 seedlings, with 408,855 seedlings still owed, agreed to return in kind but refused to pay in cash.

In the First Instance Civil Case Verdict No. 08/2013/KDTM-ST dated September 4, 2013, the People's Court of Quang Tri province decided:

Under Clause 1, Article 34, Clause 1, Article 35, Clause 1, Article 37, Articles 54, 55, 56, 300, and 301 of the Commercial Law; Clause 1 of Article 131 of the Civil Procedure Code; Clauses 4 and 5 of Article 27 of the Ordinance on Court Costs and Fees;

- Accepting the plaintiff's claim: Compelling the defendant, Limited Liability Company T, to pay the plaintiff, Joint Stock Company Q, the sum of 1,720,888,500 VND.

- Rejecting the defendant's counterclaim for the amount of 3,602,837,000 VND.

The first instance court also decided on court fees and the right to appeal for the involved parties.

On September 4, 2013, Company T filed an appeal against the entire first instance verdict.

On October 1, 2013, the Chief Procurator of the Quang Tri Provincial People's Procuracy issued Appeal Decision No. 2110/QDKNPT-P12 against the First Instance Civil Case Verdict No. 08/2013/KDTM-ST dated September 4, 2013, of the People's Court of Quang Tri province.

In the Appellate Civil Case Verdict No. 19/2014/KDTM-PT dated February 26, 2014, the Appellate Court of the Supreme People’s Court in Da Nang decided:

- Dismissing the appeal of the defendant, Limited Liability Company T.

- Rejecting Appeal No. 2110/QDKNPT-P12 dated October 1, 2013, of the Chief Procurator of the Quang Tri Provincial People's Procuracy. Upholding the first instance verdict.

After the appellate trial, Company T submitted a request for a cassation review of the appellate civil case verdict.

In the Cassation Appeal No. 01/2017/KN-KDTM dated February 24, 2017, the Chief Justice of the Supreme People’s Court appealed the Appellate Civil Case Verdict No. 19/2014/KDTM-PT dated February 26, 2014, of the Appellate Court of the Supreme People’s Court in Da Nang, proposing that the Judicial Council of the Supreme People’s Court annul the aforementioned appellate civil case verdict and the First Instance Civil Case Verdict No. 08/2013/KDTM-ST dated September 4, 2013, of the People's Court of Quang Tri province; forwarding the case file to the People's Court of Quang Tri for a retrial in accordance with the law.

At the cassation hearing, the representative of the Supreme People's Procuracy recommended that the Judicial Council of the Supreme People's Court of Vietnam accept the appeal of the Chief Justice of the Supreme People's Court of Vietnam.

COURT'S FINDINGS:

[1] Regarding procedures: According to the Minutes of the appellate court hearing on November 26, 2013, the involved parties were fully present at the hearing as summoned by the Court. However, the Trial Panel decided to adjourn the hearing to allow the involved parties to provide additional evidence. At the appellate court hearing reopened on February 26, 2014, the defendant and the lawyer defending the defendant’s legitimate rights and interests were absent. In the case where the Trial Panel had decided to adjourn the hearing, and the adjournment was due to the Court, the absence of the involved party or the representative, the defender of the legitimate rights and interests of the involved party at the reopened hearing would be considered the first absence. The appellate court should have determined that the defendant and the lawyer defending the defendant's legitimate rights and interests, who were properly summoned by the Court, were absent for the first time as per the provisions of Clause 1 Article 199 and Clause 2 Article 266 of the Civil Procedure Code to adjourn the hearing. The appellate court concluded that at the appellate hearing, the defendant and the lawyer defending the defendant’s legitimate rights and interests, who were properly summoned for the second time, were absent, thus dismissing the defendant’s appeal request. This was not conformable to Articles 199, 202, 266 of the Civil Procedure Code, which led to the loss of the right to appeal, affecting the legitimate rights and interests of the defendant.

[2] Regarding the determination of fault of the parties: According to Article 3 of the Rubber Seedling Sale Contract dated January 3, 2011, the parties agreed that by July 31, 2011, Party B (Company T) must deliver a total of 200,000 qualified seedlings to Party A (Company Q). In the Working Minute on July 15, 2011, between Mr. Ho Duy L, an employee of the Agricultural Technical Department of Company Q, and Mrs. Vo Thi T, representing Company T, regarding the inspection and assessment of seedling quality at the assembly site until July 15, 2011, the results were recorded: "Stump bag of leaf tier transferred to site 1: 15,550 bags; stump bag of leaf tier transferred to site achieving 2-3 leaf tiers or more; stable leaf tier, good quality stump bag of leaf tier." From July 15, 2011, to July 31, 2011 (the final date for seedling delivery according to the contract), the two parties did not deliver seedlings and did not have any written agreement to extend or prolong the delivery period. Company Q asserted that on July 15, 2011, Company T only had 15,550 qualified seedlings, thus could not possibly deliver the required 400,000 seedlings by July 31, 2011, and had therefore breached the contract. Meanwhile, Company T claimed that until July 31, 2011, Company Q only received 3,268 seedlings (even though Company T had 15,550 seedlings ready for delivery), thus Company Q had breached the contract.

[3] In the Minutes of the appellate court hearing on November 26, 2013, Company Q explained the reason: by July 31, 2011 (the final date for seedling delivery according to the contract), Company Q did not document the delivery of seedlings, and by September 2011, continued the contract to receive seedlings because Company Q had inspected but Company T only delivered over 79,000 seedlings. The remaining seedlings did not meet the contract standards for delivery, so Company Q agreed to extend the delivery period to offset the debt and allowed Company T to continue taking care of the seedlings to meet the delivery conditions. At the same time, Mr. H (Head of the Agricultural Technical Department of Company Q - a witness) explained that by July 31, 2011, Company Q only received 3,000 seedlings because Company Q only had 03 trucks (02 Kazma trucks and 01 Isuzu truck). At this time in Laos, it was raining, the roads were muddy, and Mrs. T had called Company Q to collect seedlings, but due to difficulties, Company Q could not collect them in time.

[4] With the facts as outlined above, it can be determined that both parties signed a contract specifying the seedling delivery period from June 30, 2011, to July 31, 2011, for a total of 200,000 seedlings (a total of 400,000 seedlings across two contracts). Although by July 15, 2011, Company T had 15,550 seedlings ready for delivery, Company Q only received 3,200 seedlings due to rain, muddy roads, and having only 03 transport trucks. Although not documented, by October 5, 2011, Company Q had agreed to extend the delivery period and committed to receiving all seedlings within 12 days. By September 21, 2011, Company Q had received 79,924 seedlings, and by October 24, 2011, the two parties were still delivering seedlings (according to the Seedling Delivery Minute dated October 24, 2011, which stated that from October 6, 2011, to October 24, 2011, 83,867 PB260 2-leaf tier seedlings of good quality were delivered). Therefore, there is evidence to determine that both Company T and Company Q were at fault in the delivery and receipt of seedlings. The first-instance and appellate courts' determination of total fault on the part of Company T and the application of the highest penalty as per Article 301 of the Commercial Law (8%) to Company T is inappropriate; the degree of fault of each party should be reassessed to determine the correct penalty.

[5] Regarding the borrowed seedlings: The case file shows that the two parties did not have a written document regarding borrowing seedlings, but both parties confirmed that Company Q lent Company T 449,455 seedlings, and Company T had returned 40,600 seedlings, still owing 408,855 seedlings. Company T claimed to have sufficient seedlings to repay and agreed to repay in seedlings, not in cash. Meanwhile, Company Q asserted that Company T did not have the capacity to repay in seedlings, so repayment in cash was requested. According to Articles 471 and 474 of the 2005 Civil Code regarding asset loan contracts; and Article 514 of the 2005 Civil Code on asset lending contracts, all stipulate the obligation of the borrower to return the same type of asset to the lender. However, the first-instance and appellate courts did not consider whether Company T had the capacity to repay in the same type, which is not consistent with legal provisions. If Company T does not have the capacity to repay in the same type of seedlings, then repayment in cash should be required.

For the above reasons,

DECISION:

Under Clause 2, Article 337, Clause 3, Article 343, and Article 345 of the 2015 Civil Procedure Code; Resolution No. 103/2015/QH13 dated November 25, 2015, of the National Assembly on the implementation of the Civil Procedure Code.

1. To accept the Cassation Appeal No. 01/2017/KN-KDTM dated February 24, 2017, of the Chief Justice of the Supreme People's Court of Vietnam against the appellate commercial judgment No. 19/2014/KDTM-PT dated February 26, 2014, by the Appellate Court of the Supreme People's Court of Vietnam in Da Nang regarding the commercial case “Dispute over goods sale contract” between the plaintiff, Company Q, and the defendant, Company T.

2. To annul the appellate commercial judgment No. 19/2014/KDTM-PT dated February 26, 2014, by the Appellate Court of the Supreme People's Court of Vietnam in Da Nang and the first-instance commercial judgment No. 08/2013/KDTM-ST dated September 4, 2013, by the People's Court of Quang Tri Province.

3. To hand over the case file to the People's Court of Quang Tri Province for retrial according to the first-instance procedure conformable to the law.

PRECEDENT CONTENT

“[1] Regarding procedures: According to the Minutes of the appellate court hearing on November 26, 2013, the involved parties were fully present at the hearing as summoned by the Court. However, the Trial Panel decided to adjourn the hearing to allow the involved parties to provide additional evidence. At the appellate court hearing reopened on February 26, 2014, the defendant and the lawyer defending the defendant’s legitimate rights and interests were absent. In the case where the Trial Panel had decided to adjourn the hearing, and the adjournment was due to the Court, the absence of the involved party or the representative, the defender of the legitimate rights and interests of the involved party at the reopened hearing would be considered the first absence. The appellate court should have determined that the defendant and the lawyer defending the defendant's legitimate rights and interests, who were properly summoned by the Court, were absent for the first time as per the provisions of Clause 1 Article 199 and Clause 2 Article 266 of the Civil Procedure Code to adjourn the hearing. The appellate court concluded that at the appellate hearing, the defendant and the lawyer defending the defendant’s legitimate rights and interests, who were properly summoned for the second time, were absent, thus dismissing the defendant’s appeal request. This was not conformable to Articles 199, 202, 266 of the Civil Procedure Code, which led to the loss of the right to appeal, affecting the legitimate rights and interests of the defendant.”

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