Preserving property and enforcing debts owed

The preservation of property is a very important step in civil actions. The timely and effective preservation of property plays a vital role in the smooth execution of the case in the future. In practice, the property of the defendant or the person subject to enforcement is often insufficient to meet the requirements of preservation and enforcement, but at the same time, it is found that the defendant enjoys a large claim owed to it by an outside party. How should these claims be preserved and enforced?

As provided in article 105 of the Opinions on Certain Issues Concerning the Application of the Civil Procedure Law of the People’s Republic of China by the Supreme People’s Court, the people’s court may rule that in accordance with the creditor’s application, where the debtor’s property cannot fulfil the injunction but the debtor has debts owed to it by a third party, the third party may not settle with the debtor. When the third party is required to pay, the third party must hold the property or price in escrow. It can be seen that the credit due to the defendant may be preserved by ruling that the third party may not settle the debt to the defendant.

This kind of “credit preservation” is different from the preservation of the defendant’s property, and its function is limited. It can only prevent the defendant from privately transferring the property after receiving payment from the third party. But it cannot prevent the third party from paying off other creditors, nor prevent the third party from disposing its own property. Therefore, the ruling cannot be deemed as the preservation of the third party’s property.

The author, Gao Ping, is a Partner at AnJie Law Firm in Beijing. She is a former judge with Beijing Second Intermediate Court, and has expertise in litigation and arbitration