In a previous article, we discussed some factors that could make a foreign civil judgment unenforceable in Taiwan. Among such factors, the most common and contentious are seen in cases involving a default judgment in a foreign country in which the defendant was not legally and timely served in that country with the notification or summons of the commencement of that lawsuit, or in which the defendant was not served with those documents in Taiwan through proper channels in accordance with Taiwan laws. When suing a Taiwanese defendant in a foreign country, it is essential to ensure that the lawsuit commencement documents are served in a manner that complies with Taiwan laws. This point was discussed in another previous article.

This article will explore another potential factor that could make foreign civil judgments unenforceable in Taiwan. We examine a real case illustrating this factor and provide suggestions to reduce this risk.

Case Background

The plaintiff, a UK company, signed a plant lease contract with a UK subsidiary of a Taiwanese company, with the Taiwanese company acting as a joint and several guarantor. The Taiwanese company’s name on the UK lease was given as “SBL GROUP.” After the Taiwanese company’s UK subsidiary defaulted on debts, the plaintiff filed a claim lawsuit in the UK against the guarantor SBL GROUP and served the lawsuit commencement documents in Taiwan based on Taiwan laws. SBL GROUP did not respond in the UK proceedings, and the UK court ruled in favor of the plaintiff. When the plaintiff attempted, based on the UK court’s favorable judgment, to seize the machinery of SBL GROUP during SBL GROUP’s participation in an overseas exhibition, an SBL GROUP employee informed the plaintiff that their company’s name was actually SBL Machinery Co., Ltd. (hereinafter, “SBL Machinery”) and not SBL GROUP. Because of this discrepancy in name, the plaintiff was unable to seize the property of SBL Machinery Co., Ltd. The plaintiff dug further and found that SBL GROUP was not a specific Taiwanese company but a collective name for a group of Taiwanese and Chinese companies controlled by the Taiwanese company’s operator. The plaintiff applied to the UK court to correct the UK judgment, changing the defendant’s name from “SBL GROUP” to “SBL Machinery Co., Ltd.” It then sought the Taiwanese court’s approval to enforce the corrected UK judgment on SBL Machinery Co., Ltd.’s properties in Taiwan.

The Taiwanese Courts’ View

The first and second instance judgments handed down by the Taiwanese courts were unfavorable to the plaintiff. The first instance judgment (Taiwan New Taipei District Court Civil Judgment No. 106-Zhong-Su-843) found that the operator of SBL Machinery operated an “SBL GROUP,” which included the defendant SBL Machinery, another Taiwanese company named Tsair Shuenn Machinery Industry Co., Ltd., and a Chinese company named STS Machinery Co., Ltd. Since the plaintiff could not prove that the entity found responsible for the debt in the UK judgment was indeed SBL Machinery, the Taiwanese court did not approve the enforcement of the UK judgment on SBL Machinery’s properties in Taiwan.

The second instance judgment (Taiwan High Court Civil Judgment No. 107-Zhong-Shang-497) recognized that the entity indicated in the UK judgment was SBL Machinery but held that the plaintiff had not legally served the UK lawsuit documents to SBL Machinery at the beginning of the UK litigation. Because various companies of the SBL GROUP were registered at the same address in Taiwan, when the UK court engaged the Taiwanese diplomatic mission and court to serve the UK litigation documents, the documents were served to the registered address of SBL Machinery, but were received by an employee of another Taiwanese company in the group, Tsair Shuenn Machinery Industry Co., Ltd. The service certificate in Taiwan also bore the seal of Tsair Shuenn Machinery Industry Co., Ltd. instead of SBL Machinery’s seal. The Taiwanese High Court determined on this basis that the UK court had not legally served to SBL Machinery the litigation documents in the UK case that concluded with the default judgment against SBL Machinery. The High Court held that for this reason the UK judgment could not be enforced in Taiwan under Taiwan law. The High Court’s judgment was recognized by the Supreme Court and became a final and conclusive judgment.

Points for Attention When Serving Documents in Taiwan

In the above case, the plaintiff failed to make the distinction between the SBL GROUP and SBL Machinery Co., Ltd. when filing the lawsuit in the UK. When serving the UK litigation documents to Taiwan, the plaintiff moreover failed to discern that various companies belonging to the SBL GROUP all shared the same registered address. This resulted in the failure to complete the correct service procedure and rendered the UK court judgment unenforceable in Taiwan.

In Taiwanese business practices, a business operator or founder family may establish multiple companies in Taiwan or worldwide to run their business. They often use a common name to collectively refer to all related companies such as “ABC Group” or “XYZ Affiliates.” Examples include the well-known Evergreen Group and Formosa Plastics Group in Taiwan. In the case discussed here, the operator of the SBL GROUP established many companies under different names and used the name “SBL” to refer to the companies collectively as the SBL GROUP. But in reality, “Group” companies or “Affiliate” companies are independent legal entities, and “Group” or “Affiliates” are merely commercial concepts, not legal entities in an actual legal relationship.

Therefore, when signing a contract with a Taiwanese company or filing a lawsuit against it, it is crucial to ensure that the Taiwanese party to the contract or litigation is a specific Taiwanese company (legal entity) and not a “Group” or “Affiliates” (which are merely business terminology). Before taking any legal action, foreign parties are well advised to engage Taiwanese lawyers who are familiar with local business culture to confirm the identity of Taiwanese parties, to avoid the pitfalls of misidentification of parties in legal actions.

Additionally, even if the specific legal entity for a lawsuit is determined, Taiwanese business operators may register numerous companies in the same “Group” or “Affiliates” at the same address in Taiwan. In such cases, ensuring that foreign litigation documents are accurately served to the correct legal entity, rather than to other companies in the same group, is crucial for enforcing foreign judgments in Taiwan. The document service process conducted through the Taiwanese diplomatic mission and court, and relevant service certificates, are often in traditional Chinese. Therefore, having Taiwanese lawyers oversee the document service process from the foreign court to Taiwan can ensure that the foreign litigation documents are properly served to the correct defendant. This can effectively reduce the risk of procedural defects in document service that could cause foreign court judgments to become unenforceable in Taiwan.

This article was co-authored by partner Gary Guo and attorney-at-law Yi-Kai Chen.

If you want to know more about enforcement of foreign court judgments, please contact our firm at gkuo@winklerpartners.com or ychen@winklerpartners.com.