01 July 2016

True or False? – About False Litigation

The Supreme Court recently issued the Guiding Opinions on False Litigation Prevention and Sanction (Document 2016 No. 13,hereinafter referred to as the Opinions) and reiterated its harsh stance on cracking down on false litigation, which has significantly adverse effects on the credibility of the justice system and litigation procedure. For these reasons it should not be tolerated. This article discusses whether sanctions on false litigation may affect authentic litigation, especially in cases that may appear at first sight to be meritless and how parties should deal with this problem. 

It’s not unusual for litigation to be mistakenly considered unwarranted, particularly in financial cases. As a possible example: a debtor (or obligator) recognizes the debt or obligation but refuses to fulfill duties; the creditor (or obligee) files charges for forcible execution in terms of the agreement; the debtor (or obligator) is absent but has acknowledged evidence or facts presented; and the case has implications which affects the rights of an unrepresented third party. 

When a defendant is not present, or accepts certain facts or evidence concerning a third party who is not present, the plaintiff may think that winning would be without question. Seasoned lawyers, however, should remind their clients that some of the facts presented may be considered by the court constitute a false litigation because of the suspect of no substantive confrontation existing and colluding to infringe upon rights of people not involved in the case. Under such circumstance, the priority for the plaintiff is to prove authenticity of the lawsuit. Effects of False litigation include:

1. Heavier burden of proof

When litigation is suspected of being false, two factors might contribute to a requirement for a heavier burden of proof assumed by plaintiff. On the one hand, as Article 4 of the Opinions states, the collegiate bench has to strengthen the scrutiny on evidence to determine the nature of the litigation; on the other hand, as the head of the first civil court of the Supreme Court said to reporters regarding the Opinions, “even if the judge suspects it is a false litigation, without damning evidence, the court still has to address the needs of the plaintiff,” to minimize the risk of making a decision in a case where the plaintiff may have ulterior motives, the bench must require the plaintiff to meet a heavier burden of proof. 

In these circumstances, the heavier burden of proof is mainly reflected in the following: 1. the court might require one of the parties to the litigation to take on the burden of the other party; 2. the court might require additional evidence even if the obligation is fulfilled; 3. for facts both parties agree to, the court might still require the further evidence from one party. Cases of such kind set a higher standard for the burden of proof.

Therefore, for cases that seem to be proceeding without resistance but are suspected to be false litigation, the plaintiff can’t afford to take anything for granted, but rather, should prepare well to avoid any consequences of being considered to have participated in false litigation.

2. Significance of outsiders and other parties

Where the defendant is absent from trial and the case involves the interests of outsiders, false litigation may be suspected, irrespective of their nature. For those cases, the court highly values statements and the views of other parties involved. This explains why Article 9 of the Opinions stipulates that Notifications to join the litigation shall be given ex officio to persons who may have an interest to the outcome of the trial so as to avoid infringement of civil rights and prevent false litigation.

Under extreme circumstances where outsiders are supporting the defendant or perhaps may be colluding with the defendant, while the plaintiff handles improperly, the court may reject any request from the plaintiff (although it is legitimate) based on the suspect of false litigation and admission of outsiders’ statements (even it is far from the truth).

Therefore, parties to litigation should fully consider all possible statements and standpoints of outsiders and the effects their statements and standpoints might have on the case. Parties should prepare in advance the presentation of facts, evidence and laws or regulations needed to properly support their case.

3. More severe legal consequences

The Opinions sets a precedent in specifying penalties such as fines, detention, blacklists, transfer to organs of investigation, etc. for interested parties participating in the litigation, court personnel, agents ad litem, identification authorities and officials. 

In addition, Article 11 of the Opinions stipulates that once proven, the court doesn’t allow withdrawal of false litigation, instead, according to the Article 112th of the Civil Procedure Law, the court will dismiss all claims, following which, as a general rule, the plaintiff will be forever deprived of the right to file lawsuits with the same claim and purpose as per the principle of ne bis in idem. This prohibition directly affects the substantive rights of the plaintiff and the subsequent remedy approaches. 

Therefore, false litigation has severe consequences. In order to protect legitimate rights and interests, interested parties need to be thorough in preparing for trial to avoid a charge of false litigation and to avoid the consequences that may ensue. 

In recent times there has been an increased awareness of legal consequences and the need to reduce legal risk. The number of “bad debts” (the debts are acknowledged but are refused to be paid off by debtors )has increased as well, leading to cases where no confrontation exists, where the defendant is not present or where there is resistance from other parties (e.g., multiple layers of security on the same property or disposal of collaterals under bad debts). In such a situation, when facing the issue of how to find the debtor’s property to apply for forcible execution, the plaintiff should also make full preparation in respect of facts, laws, evidence, standpoints of the parties and other relevant elements from all possible angles to avoid the potential of being accused of false litigation. 

Editor’s note: This article was simultaneously published on Chinalawinsight.com

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