Precedent No. 44/2021/AL

Precedent No. 44/2021/AL on determining the statute of limitations for filing a counterclaim was adopted by the Council of Judges of the Supreme People's Court on November 25, 2021 and promulgated under Decision No. 594/QD-CA dated December 31, 2021 of the Chief Justice of the Supreme People's Court.

Source of case law:

Final judgment No. 10/2021/KDTM-GDT dated September 14, 2021 of the High People's Court in Hanoi on the commercial business case  "Dispute over design consultancy contract"  in Hanoi, between the plaintiff, H Joint Stock Company, and the defendant, P Design and Construction Company Limited.

Location of case law:

Paragraph 2 of the “Court's Opinion” section.

Overview of case law:

- Case law:

In a civil case, the defendant has a counterclaim against the plaintiff, and the person with related rights and obligations has an independent claim.

- Legal solutions:

In this case, the Court must determine that the defendant's counterclaim is a lawsuit request and must comply with the provisions of law on the statute of limitations for filing a lawsuit.

Legal provisions relating to precedents:

Clause 4, Article 60, Article 159, Article 176, Article 178 of the 2004 Civil Procedure Code (corresponding to Clause 4, Article 72, Article 184, Article 200, Article 202 of the 2015 Civil Procedure Code); Point e, Clause 1, Article 217 of the 2015 Civil Procedure Code.

CASE CONTENT

According to the petition dated June 24, 2010 and the process of resolving the case, the plaintiff is Joint Stock Company H, whose representative presented:

On January 29, 2008, H Joint Stock Company and P Design and Construction Company Limited signed Design Consulting Contract No. 01-2008/PLC-HDC, with the following content: P Design and Construction Company Limited (Consultant) is responsible for designing the entire Project "Trade Center - 4-star HD - Hotel" on a land area of ​​8,971m2 ^at  D7, Ward X, District T, Hanoi City, with H Joint Stock Company as the Investor. The total contract value is 1,754,550 USD (excluding value added tax), divided into 3 implementation phases: Phase 1 - Construction design; Phase 2 - Landscape interior design; Phase 3 - Author supervision.

Accordingly, Phase 1 (Construction Design), the design fee is 1,191,822 USD (symbolized as A); the author supervision fee is 62,728 USD (symbolized as AA) divided into 12 installments (from "Payment 1" to "Payment 12"), in which:

- First payment: 25% x A immediately after signing the Contract and the Consultant has submitted the Contract Guarantee Bank Certificate and Insurance Contracts to the Investor.

- 2nd payment: 5% x A after submitting the master plan design documents and architectural plan to the Investor and being approved by the Investor.

- 3rd payment: 10% x A after submitting the master plan design documents and architectural plans to the Hanoi Department of Planning and Architecture or equivalent competent authorities and the above documents are reviewed and approved.

During the implementation of Phase 1 (Construction Design), P Design and Construction Company Limited submitted to H Joint Stock Company the Insurance Contracts, Bank Guarantee Certificates and Design Documents for the overall planning and architectural plan of the Project. H Joint Stock Company transferred payment to P Design and Construction Company Limited in 02 installments: 1st payment (25% x A and value added tax, according to Value Added Tax Invoice No. 0081905 dated February 27, 2008); 2nd payment (5% x A and value added tax, according to Value Added Tax Invoice No. 0081909 dated August 18, 2008). The total amount of the 2 payments mentioned above is 396,751.75 USD, equivalent to 6,374,689,675 VND converted at the VND/USD exchange rate at the time of payment. Then, due to changes in the scale of the Project and the two parties could not agree on adjusting the contract value for the new design, H Joint Stock Company unilaterally terminated the Contract and had a dispute with P Design and Construction Company Limited about the payment value.

H Joint Stock Company believes that in the first payment, H Joint Stock Company made an advance payment in excess of the actual work volume that P Design and Construction Company Limited had performed. Now H Joint Stock Company only agrees to pay P Design and Construction Company Limited an amount of approximately 8% of the construction design fee (8% x A) for both payments (first and second payments). In addition, H Joint Stock Company accepts to pay a penalty equivalent to 1% of the Contract value due to H Joint Stock Company's unilateral termination of the Contract. Therefore, H Joint Stock Company filed a lawsuit requesting the Court to force P Design and Construction Company Limited to refund H Joint Stock Company the amount that H Joint Stock Company had overpaid to P Design and Construction Company Limited, which is 278,841.8 USD (after deducting the advance payment from the payment amount).

The defendant is P Design and Construction Company Limited, represented by the representative:

P Design and Construction Company Limited does not accept the plaintiff's request to sue for money back on the grounds that this is the money that H Joint Stock Company has paid to P Design and Construction Company Limited according to the agreed progress in the Contract, not the advance payment. In addition, P Design and Construction Company Limited has a Counterclaim, requesting that H Joint Stock Company, in addition to having to pay a fine equivalent to 1% of the Contract value due to unilateral termination of the Contract, H Joint Stock Company must continue to pay P Design and Construction Company Limited the 3rd Payment (10% of the design fee) because P Design and Construction Company Limited has completed technical support to approve the Project's Design Document. P Design and Construction Company Limited believes that the failure to submit the Design Document to the competent authority, leading to this Design Document not being approved, is entirely the fault of H Joint Stock Company.

In the First Instance Commercial Judgment No. 01/2011/KDTM-ST dated June 20, 2011, the People's Court of Hoan Kiem District, Hanoi City decided:

Accept the lawsuit of H Joint Stock Company against P Design and Construction Company Limited. Compel P Design and Construction Company Limited to return to H Joint Stock Company the advance payment of Contract No. 01-2008/PLC-HDC signed on January 29, 2008, which is 272,571.41 USD, equivalent to 5,642,228,187 VND. Reject the counterclaim of P Design and Construction Company Limited against H Joint Stock Company.

On July 1, 2011, P Design and Construction Company Limited appealed the entire first instance judgment.

In the Commercial and Business Appeal Judgment No. 27/2011/KDTM-PT dated September 21, 2011, the Hanoi People's Court decided:

Not accepting the appeal of P Design and Construction Company Limited. Upholding the decision of the First Instance Judgment.

After the appeal trial, P Design and Construction Company Limited filed a request for a review of the above appeal judgment.

In the Appeal Decision No. 60/2014/KN-KDTM dated September 15, 2014, the Chief Justice of the Supreme People's Court appealed the Appellate Business and Commercial Judgment No. 27/2011/KDTM-PT dated September 21, 2011 of the Hanoi People's Court; requested the Economic Court of the Supreme People's Court to conduct a final review in the direction of annulling the above-mentioned appeal judgment and annulling the First Instance Business and Commercial Judgment No. 01/2011/KDTM-ST dated June 20, 2011 of the Hoan Kiem District People's Court, Hanoi City; and transferred the case file to the Hoan Kiem District People's Court, Hanoi City for a retrial in accordance with the provisions of law.

In the Final Appeal Decision No. 18/2015/KDTM-GDT dated March 26, 2015, the Economic Court of the Supreme People's Court decided to: Annul the Appellate Commercial and Business Judgment No. 27/2011/KDTM-PT dated September 21, 2011 of the Hanoi People's Court and the First Instance Commercial and Business Judgment No. 01/2011/KDTM-ST dated June 20, 2011 of the Hoan Kiem District People's Court, Hanoi City; transfer the case file to the Hoan Kiem District People's Court, Hanoi City for retrial in accordance with the provisions of law.

In the First Instance Commercial Judgment No. 32/2019/KDTM-ST dated November 25, 2019, the People's Court of Hoan Kiem District, Hanoi City decided:

1. Reject the lawsuit of H Joint Stock Company against P Design and Construction Company Limited to force P Design and Construction Company Limited to return to H Joint Stock Company the amount of VND 6,308,478,665.
2. Partially accept the counterclaim of P Design and Construction Company Limited, forcing H Joint Stock Company to pay P Design and Construction Company Limited (as of November 20, 2019), the specific amount as follows:

+) Third payment (according to Design Consulting Contract No. 01/2008/PLC-HDC dated January 29, 2008): VND 1,599,420,000.

+) Compensation (according to Article 2.8.5b, general conditions of Design Consulting Contract No. 01/2008/PLC-HDC dated January 29, 2008) is: VND 406,704,690.

+) Interest on the amount of 1,599,420,000 VND is 2,080,735,870 VND.

Total is: 4,086,860,560 VND.

3. In addition to the amount that H Joint Stock Company must pay to P Design and Construction Company Limited as above, H Joint Stock Company must also pay P Design and Construction Company Limited the interest on the amount of VND 1,599,420,000 from November 21, 2019 until payment is completed at the late payment interest rate agreed upon by the parties of 12%/year.
4. Regarding the compensation amount (according to Article 2.8.5b, general conditions of Design Consulting Contract No. 01/2008/PLC-HDC dated January 29, 2008) of VND 406,704,690, from the date P Design and Construction Company Limited submitted a request for enforcement of the judgment until H Joint Stock Company completed the payment, H Joint Stock Company must also pay interest on the amount remaining to be enforced at the interest rate prescribed in Article 357, Article 468 of the  2015 Civil Code.

In addition, the Court of First Instance also decides on court fees and the parties' right to appeal.

On December 9, 2019, P Design and Construction Company Limited and H Joint Stock Company both filed an appeal against the above first instance judgment.

In the Commercial and Business Appeal Judgment No. 82/2020/KDTM-PT dated June 15+19, 2020, the Hanoi People's Court decided:

Amending the First Instance Commercial Judgment No. 32/2019/KDTM-ST dated November 25, 2019 of the People's Court of Hoan Kiem District on the declaration of the obligation to pay interest on late execution of judgment.

1. Not accepting the lawsuit request of H Joint Stock Company against P Design and Construction Company Limited to force P Design and Construction Company Limited to return the amount of VND 6,308,478,665.
2. Partially accept the counterclaim of P Design and Construction Company Limited. H Joint Stock Company must pay P Design and Construction Company Limited the following amounts: VND 1,599,420,000 (payment for phase 03 of the Design Consulting Contract) + VND 2,080,735,870 (late interest) + VND 406,704,690 (penalty for unilateral termination of the contract). Total: VND 4,086,860,560.

On November 2, 2020, H Joint Stock Company filed a request for a review of the above civil appellate judgment.

In Appeal Decision No. 02/KNGĐT-VC1-KDTM dated March 2, 2021, the Chief Prosecutor of the High People's Procuracy in Hanoi appealed the Appellate Business and Commercial Judgment No. 82/2020/KDTM-PT dated June 15+19, 2020 of the People's Court of Hanoi; requested the Judicial Committee of the High People's Court in Hanoi to annul the above-mentioned Appellate Business and Commercial Judgment and annul the First Instance Business and Commercial Judgment No. 32/2019/KDTM-ST dated November 25, 2019 of the People's Court of Hoan Kiem District, Hanoi City; and transfer the case file to the People's Court of Hoan Kiem District, Hanoi City for retrial in accordance with the provisions of law.

At the appeal hearing, the representative of the High People's Procuracy in Hanoi requested the Judicial Committee of the High People's Court in Hanoi to accept the appeal of the Chief Prosecutor of the High People's Procuracy in Hanoi.

JUDGMENT OF THE COURT

[1] Regarding the proceedings: The Power of Attorney dated October 1, 2015 and the Power of Attorney dated March 16, 2016 show that Mr. S is the legal representative of P Design and Construction Company Limited, authorizing Mr. D and Mr. N to participate in the proceedings as authorized representatives of the defendant. However, according to the verification results at the Immigration Department in Official Dispatch No. 9089/A72-P4 dated August 10, 2015, Official Dispatch No. 14733/A72-P4 dated December 11, 2015 and Official Dispatch No. 9443/QLXNC-P4 dated June 12, 2019, it was determined that "Mr. S left the country on October 18, 2014, there is no information related to Mr. S's entry and exit from August 1, 2015 to June 7, 2019".

Thus, there is a basis to determine that at the time Mr. S signed the power of attorney for Mr. D and Mr. N to participate in the proceedings, Mr. S was not present in Vietnam. In the event that these power of attorneys were made and sent from abroad, according to the provisions of Article 478 of the Civil Procedure Code, they must be notarized, authenticated and consularly legalized to be legally valid.

In addition, determining whether Mr. S was in Vietnam or abroad at the time of making the power of attorney is also related to the consideration and determination of the jurisdiction to resolve the case. The Court of First Instance and the Court of Appeal have not clarified these contents but have accepted the value and content of the power of attorney (while the Plaintiff also requested the Court to verify the authenticity and legality of these power of attorneys) is a serious violation of the proceedings.

[2] Regarding the counterclaim, the Court of Appeal's judgment in Judgment No. 82/2020/KDTM-PT that the counterclaim is not limited by the statute of limitations (p. 15) is incorrect. According to the provisions of the 2004 Civil Procedure Code and the 2015 Civil Procedure Code, a counterclaim is a request that is not included in the plaintiff's request and can be resolved in a separate case; resolving the counterclaim in the same case is to achieve a more accurate and faster resolution.

A counterclaim is also a request to initiate a lawsuit, so it must comply with the provisions on the statute of limitations for filing a lawsuit. Therefore, in case there is a counterclaim and a party in the case requests the application of the statute of limitations for filing a lawsuit, the Court of First Instance and the Court of Appeal must determine whether the counterclaim is still within the statute of limitations for filing a lawsuit in accordance with the law.

[3] Regarding the content: According to the Design Consulting Contract between the two parties, the condition for the 3rd Payment is: "After submitting the master plan design documents and architectural plans to the Hanoi Department of Planning and Architecture or equivalent competent authorities and the above documents are reviewed and approved".

The case file documents show that, after receiving Official Letter No. 99-2008/CV-HD/QLDA dated September 3, 2008 of H Joint Stock Company notifying about stopping printing design drawings due to changing the scale of the Project (increasing the number of floors), P Design and Construction Company Limited accepted the content of this notice of H Joint Stock Company, so on September 29, 2008, P Design and Construction Company Limited sent Official Letter No. MLS/HD/29/9/08 on "Offering price for design fee of high-class hotel project H" to adjust the price for the new design plan.

Due to the failure to reach an agreement on adjusting the contract value, H Joint Stock Company unilaterally terminated the contract before the deadline. The two parties disputed the settlement of the consequences of unilaterally terminating the contract. H Joint Stock Company claimed that it had overpaid P Design and Construction Company Limited the amount of 278,841.8 USD (after deducting the advance payment from the payment amount), so it filed a lawsuit to reclaim the amount.

P Design and Construction Company Limited disagrees with the lawsuit request of H Joint Stock Company and has a counterclaim to force H Joint Stock Company to pay the third payment according to the contract and the penalty for violation.

Seeing that Joint Stock Company H has unilaterally terminated the contract (according to the provisions of Point g, Article 2.8.1, Part II), according to Point a, Article 2.8.5, Part II of the Design Consulting Contract, it is stipulated that: “When terminating the contract according to Articles 2.8.1 or 2.8.2 of the General Conditions of the Contract, the parties will agree on payment to the Income Consultant according to Article 6 of the General Conditions of the Contract on the basis of the Consulting services performed satisfactorily and approved by the investor during the period before the effective date of termination of the contract.

In addition, the investor does not have to pay the consultant any other amount, except for Article 2.8.1.g, in which the investor will compensate the consultant equivalent to 1% of the contract value". Therefore, it is necessary to base on the actual value of the volume of work that P Design and Construction Company Limited has performed as a basis for determining the payment obligations of H Joint Stock Company.

The Court of First Instance and the Court of Appeal did not require P Design and Construction Company Limited to present documents and evidence proving the actual volume of work that P Design and Construction Company Limited had performed after the second payment of phase 1 as stipulated in Article 6.4 of the Design Consulting Contract, and partially accepted the defendant's counterclaim, forcing H Joint Stock Company to pay P Design and Construction Company Limited half of the amount of the third payment under the contract (corresponding to 5% of the construction design fee), which is incorrect and affects the plaintiff's rights.

[5] Therefore, the appeal of the Chief Prosecutor of the High People's Procuracy in Hanoi is well-founded, so the entire appellate judgment and the first-instance judgment should be annulled for a retrial.

For the above reasons,

DECISION

Pursuant to Point a, Clause 1, Article 337, Clause 3, Article 343, Article 345 of the 2015 Civil Procedure Code:

1. Accept Appeal Decision No. 02/QDKNGDT-VC1-KDTM dated March 2, 2021 of the Chief Prosecutor of the High People's Procuracy in Hanoi.
2. Annul the entire Commercial and Business Appeal Judgment No. 82/2020/KDTM-PT dated June 15+19, 2020 of the Hanoi People's Court and annul the entire Commercial and Business First Instance Judgment No. 32/2019/KDTM-ST dated November 25, 2019 of the Hoan Kiem District People's Court, Hanoi City on the case of "Dispute over design consulting contract" between the plaintiff, H Joint Stock Company, and the defendant, P Design and Construction Company Limited.
3. Transfer the case file to the People's Court of Hoan Kiem District, Hanoi City for re-trial according to first-instance procedures in accordance with the provisions of law.

CONTENT OF PRECEDENT

“[2] Regarding the counterclaim, the judgment of the Court of Appeal in Judgment No. 82/2020/KDTM-PT that the counterclaim is not limited by the statute of limitations for filing a lawsuit (p. 15) is incorrect. According to the provisions of the 2004 Civil Procedure Code and the 2015 Civil Procedure Code, a counterclaim is a request that is not included in the plaintiff's request and can be resolved in a separate case; resolving the counterclaim in the same case is for a more accurate and faster resolution. The counterclaim is also a lawsuit request, so it must comply with the provisions on the statute of limitations for filing a lawsuit. Therefore, in the event that there is a counterclaim and a party in the case requests the application of the statute of limitations for filing a lawsuit, the Court of First Instance and the Court of Appeal must determine whether the counterclaim is still within the statute of limitations for filing a lawsuit or not in accordance with the law.”

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