Property preservation issue during court mediation
When handling a contract dispute case, we applied for property preservation in the lawsuit against the defendant’s property. After the court ruled to preserve, the plaintiff and the defendant reached a mediation intention, and submitted a mediation plan to the court after reaching an agreement on the amount and time of payment to the defendant. After examination, the judge asked for opinions on the preservation measures. As the plaintiff’s agent, our opinion is that the protective measures can only be lifted after the payment has been made in full. After communication with the defendant, both parties reached an agreement and completed the mediation under the auspices of the judge.
The judge’s opinion is that if the case is settled through mediation and there is no clear agreement between the two parties on the preservation ruling, the preservation ruling will be rescinded after the mediation agreement takes effect. We believe that property preservation has nothing to do with whether the case is settled through mediation, and is effective within the time limit of the preservation measures. Unless the plaintiff applies for the release of property preservation or the court releases property preservation ex officio. We also believe that even if the case is settled through mediation, the court does not need to take the initiative to remove the preservation according to its authority.
Article 166 of the interpretation of the Supreme People’s Court on the application of the Civil Procedure Law of the people’s Republic of China (revised in 2022) stipulates that: after making an order to take preservation measures, the people’s court shall make an order to cancel the preservation in any of the following circumstances: (1) the preservation is wrong; （2） The applicant withdraws the preservation application; （3） The action or claim of the applicant is rejected by an effective judgment; （4） Other circumstances under which the people’s court considers that the preservation should be lifted.
This article does not contain the relevant content that the court may rescind the preservation after the mediation agreement takes effect. As for what circumstances belong to other circumstances that the people’s court thinks should be lifted. There are no relevant provisions in the civil procedure law and the interpretation of the civil procedure law.
However, Article 28 of the provisions of the Supreme People’s Court on the attachment, seizure and freezing of property by the people’s court in civil enforcement stipulates several circumstances under which the people’s court should make a ruling to lift the attachment, seizure and freezing, respectively:
（1） Sealing up, detaining or freezing the property of persons not involved in the case;
（2） The person applying for execution withdraws his application for execution or waives his creditor’s rights;
（3） The sealed up, distrained or frozen property cannot be auctioned or sold, and the applicant for enforcement and other enforcement creditors do not agree to accept the debt repayment, and they are unable to take other enforcement measures against the property;
（4） Debts have been paid off;
（5） The person subjected to execution provides a guarantee and the person applying for execution agrees to lift the seal up, seizure or freezing;
（6） Other circumstances under which the people’s court deems it necessary to lift the seal up, seizure or freezing.
Therefore, judging from the above provisions, the judge is not given the right to take the initiative to cancel the preservation ruling or measures ex officio when the case is settled through mediation.
Moreover, considering the original intention of the establishment of the property preservation system, the judge does not need to take the initiative to remove the property preservation according to his authority. Assuming that after the mediation agreement takes effect, if the parties do not apply for the removal of preservation on their own initiative, the judge can take the initiative to remove it ex officio, the defendant’s property will be in a state of free disposal between the expiration of the performance period agreed in the mediation agreement and the plaintiff’s application for enforcement. If the defendant takes advantage of this opportunity to transfer property, the plaintiff’s claim will face the risk of being unrealized. This does not accord with the original intention of the property preservation system in litigation.
Therefore, we believe that the conclusion of mediation has nothing to do with whether the property preservation is lifted. If the parties fail to deal with the property preservation issue during mediation, the mediation process should not be affected, and it is not appropriate to force the parties to deal with the issue during mediation.