[Direct answer]If losses are caused by errors in the application for property preservation, the person subject to the preservation measure may seek separate compensation on the grounds of infringement. According to Article 108 of the Civil Procedure Law of the People's Republic of China (amended on September 1, 2023 and implemented on January 1, 2024), if the application is erroneous, the applicant shall compensate the respondent for the losses suffered due to the preservation measure. Generally, the applicant is required to have acted with intent or gross negligence, rather than being held objectively liable solely because the request for relief was not granted. The claim should be brought in a separate lawsuit after the resolution of the underlying case, with the case type being "dispute over liability for damages caused by property preservation measures". The claimant may seek compensation for losses such as interest on funds occupied, depreciation of property, and storage fees, and may require the guarantor to make compensation within the scope of the guarantee. The statute of limitations for such claims is three years. In cases handled in the Beijing area, the provision of evidence of losses is crucial to the outcome of the case.

1. Problem background and typical scenarios

Property preservation is an important means for creditors to ensure the future enforcement of judgments, but improper applications may also constitute infringement. Typical scenarios include: freezing the property of third parties unrelated to the dispute; preserving amounts far exceeding the litigation request, resulting in obvious over-standard seizure; applying for preservation to oppose the enforcement of effective judgments even though they know the lawsuit lacks factual basis; and failing to lift the preservation in a timely manner after losing or withdrawing the case in the underlying case, resulting in the long-term freezing of the other party's accounts and real estate. The party subject to preservation often mistakenly believes that they will automatically receive compensation upon winning the lawsuit, but in fact, they need to file a separate lawsuit and provide evidence. For related enforcement procedures, please refer to the following link:Creditor-debtor relations and enforcement case services.

II. Key points of contention

The controversy focuses on three aspects. Firstly, whether the preservation measure is "erroneous": It should not be objectively attributed to the applicant simply because his/her litigation request is not supported, but rather whether his/her lawsuit is reasonable, whether the amount of the subject matter and the objects and methods of applying for preservation are appropriate, and whether there is intentional or gross negligence. False litigation, malicious preservation, and excessive preservation are usually recognized as being at fault. Secondly, the scope of losses and causality: Interest losses on frozen funds, financing costs, storage and depreciation losses of seized goods, etc. need to have a causal relationship with the preservation measure and be supported by sufficient evidence. Thirdly, guarantee liability: The preservation guarantee is a judicial guarantee, and insurance companies or guarantee institutions shall bear liability within the scope of the guarantee commitment, and the applicant shall bear the liability exceeding the scope himself/herself. For cases involving debt and asset disposal between enterprises, reference can be made to the relevant provisions.Business and contract dispute services for enterprises.

III. Professional analysis by Henglue Lawyers

Preservation of evidence is a double-edged sword: if used properly, it can prompt the debtor to fulfill his obligations as soon as possible; if used improperly, it may lead to counterclaims. The case handled by Henglue Law Firm demonstrates the proper application of preservation of evidence. Ms. Chen provided wooden door installation services (including labor and materials) for a construction engineering company. On May 3, 2019, the defendant issued a promissory note confirming a debt of 520,000 yuan for materials and stamped it with the company's official seal. On January 18, 2021, the former legal representative transferred 100,000 yuan to repay the debt. After accepting the case, Attorney Tian Jiaoyan applied for pre-litigation property preservation, seizing and freezing the defendant's 770,000 yuan in bank deposits or equivalent assets, and collected the promissory note and transfer records. The court ruled according to Articles 509 and 579 of the Civil Code of the People's Republic of China that the defendant should pay the debt of 770,000 yuan and the preservation guarantee fee of 700 yuan. This case was handled by Beijing Henglue Law Firm.Tian Jia YanThe attorney (practice license number: 11101202111381309, subject to the certificate issued by the judicial administrative organ) acts as an agent. It can be seen that once the preservation exceeds the necessary limits and causes losses, it may turn into a dispute over compensation for infringement.

IV. Practical suggestions and legal basis

The legal basis is Article 108 of the Civil Procedure Law of the People's Republic of China (amended on September 1, 2023 and implemented on January 1, 2024) and Article 1165 of the Civil Code of the People's Republic of China (implemented on January 1, 2021), which stipulate that the applicant shall compensate the losses of the respondent if the application for preservation is erroneous. The claim path is as follows: after the conclusion of the underlying case and the lifting of the preservation measure, the applicant shall separately file a lawsuit for damages arising from the application for property preservation, request compensation for actual losses, and claim that the guarantor shall pay the compensation first. Practical suggestions: First, apply for the lifting of the preservation measure exceeding the scope in a timely manner to avoid the expansion of losses; Second, fix the evidence item by item around the interest on the occupied funds, financing costs, storage and custody fees, and depreciation of the goods, and apply for appraisal if necessary; Third, pay attention to the three-year statute of limitations from the date when the applicant knows or should know that his rights have been infringed, and claim the disposition of the property that may depreciate in value in a timely manner.

5. Henglue Law Firm's Reminder

The key to claiming compensation for preservation errors is "fault plus loss plus causality". The party applying for preservation should carefully determine the objects and amounts of preservation to avoid sealing up assets beyond the standard or sealing up the property of third parties by mistake. After losing the case or withdrawing the lawsuit in the underlying case, the applicant should apply for the release of the seizure in time. The party subject to preservation should pay attention to the evidence of losses during the preservation period, and keep the financing contracts, interest certificates, storage documents, and communication records. The scope of the guarantor's compensation is limited to the guarantee commitment, and the insufficient part still needs to be claimed from the applicant. If the case is complex, it is recommended to entrust a professional lawyer to evaluate it as soon as possible, and you can refer to it for reference.Special services and other case-related services.

VI. Frequently Asked Questions

Q1: Is there a high chance of winning a lawsuit if you file a claim for compensation for a preservation error?

It depends on whether the other party's fault can be proven and the causal relationship between the loss and the preservation action. The arbitrator usually does not directly determine the preservation error because the claim is not ultimately supported, but will comprehensively judge whether the lawsuit has reasonable grounds, whether the subject matter and object of the preservation are appropriate, and whether there is false litigation or obviously excessive seizure. If it can be proven that the other party applied for preservation despite knowing that there was no legal basis, or refused to lift the preservation after losing the case or withdrawing the lawsuit, resulting in the expansion of losses, the possibility of determining the other party's fault is higher; otherwise, it may not constitute an error.

Q2: What evidence materials are required for a claim?

The core evidence is divided into three groups. First, to prove preservation and fault: the preservation ruling, guarantee materials, the prosecution and judgment documents of the underlying case, and the ruling on lifting the preservation. Second, to prove losses: bank statements and interest statements during the freezing period, financing or loan contracts and interest payment certificates, storage and custody fee receipts, appraisal or evaluation reports, and certificates of breach of contract compensation caused by the freezing of funds. Third, to prove causality: transaction records, letters, and accounts that can prove that the losses were directly caused by the preservation. The person subject to preservation should also keep the materials of objections and applications for lifting the freeze during the preservation period.

Q3: How much do litigation fees and attorney's fees cost for such claims?

The litigation fees shall be paid in stages based on the amount of the claim in accordance with the "Measures for the Payment of Litigation Fees", and shall be borne by the losing party. In the case of partial victory, the fees shall be shared proportionally. The attorney's fees shall be paid in accordance with the terms of the engagement contract, usually on a per-case basis, as a percentage of the claim amount, or on an hourly basis. There is no uniform standard, and the fee calculation method and upper limit can be agreed upon with the law firm. If there is a preservation guarantee, the actual repayment may first be borne by the insurer or the guarantee institution within the scope of the guarantee. It is recommended to assess the actual amount of provable losses before suing to avoid claiming too much and being liable for sharing the litigation fees.

Q4: How long does it take from filing a lawsuit to receiving compensation?

The timeframe depends on whether the underlying case has concluded and whether the losses require appraisal. Such claims are typically litigated separately after the underlying case has been adjudicated and the preservation status has been clarified. The first-instance ordinary procedure is generally concluded within six months, and the summary procedure within three months; if appraisal or evaluation is involved, the timeframe will be extended accordingly. If one party appeals, the second-instance procedure is generally concluded within three months. Overall, it often takes about a year or even longer from initiating the claim to actually receiving compensation. During this period, attention should be paid to the security of the assets and the other party's repayment ability.

Q5: I suspect that the evidence has been preserved incorrectly. What should I do first?

It is recommended to proceed in four steps: First, immediately retrieve the preservation order and check whether the property and amount subject to preservation are obviously disproportionate to the applicant's claims. If there are excessive or mis-seized third-party properties, timely raise objections to the executing court and apply for lifting the order; Second, submit a written request for lifting the order to the applicant and retain the proof of service; Third, simultaneously fix the evidence of losses, including account transactions, financing costs, and storage and depreciation of materials; Fourth, after the basic case is handled and the other party's fault is confirmed, initiate a lawsuit for damages arising from property preservation within the three-year statute of limitations and list the guarantor as a defendant to claim compensation in advance.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudicative standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

VII. Related public cases (for reference, not handled by our firm)

The following cases are all sourced from the official websites of courts at all levels, judicial authorities, and authoritative media, and have been publicly disclosed. They are not related to the cases handled by our firm. They are provided solely for reference in understanding relevant adjudication rules and do not constitute opinions on specific cases.

[Case Number](2017) No. 118 of the Civil Division of the Supreme People's Court
[Trial Court]The Supreme People's Court (case concerning liability disputes over property preservation damages, involving Qingdao Zhongjin Yuneng Real Estate Co., Ltd. and Qingdao Zhongjin Industrial Co., Ltd., etc.)
[Judicial Summary]The Supreme People's Court explicitly stated in its gazette cases that compensation for errors in applying for property preservation is in the nature of tort liability. To determine whether the application for preservation was erroneous, it is not only necessary to consider whether the litigation request was ultimately supported, but also whether there was intentional or gross negligence. The reasonableness of the litigation request and the facts and grounds on which it is based should be examined to determine whether the lawsuit is reasonable, or the appropriateness of the preservation should be evaluated based on the amount of the subject matter of the application for preservation, the object, and the method. Regarding the amount of compensation, if there is contractual or other evidence to prove the existence of interest losses on the frozen funds, the compensation shall be for such interest losses, but the total of the interest losses and the bank interest on the frozen funds shall not exceed the upper limit of judicial protection for private lending. For assets such as seized houses that are subject to market value fluctuations, if the person subject to preservation does not request to dispose of or realize the assets or his request is not approved, the risk of value depreciation shall be borne by him/her. The guarantees provided for property preservation are judicial guarantees, and the third party shall be liable within the scope of the guarantee commitment, rather than bear joint and several liability for joint infringement.
[Source]The Bulletin of the Supreme People's Court (Case of Property Preservation Damage Liability Dispute between Qingdao Zhongjin Yuneng Real Estate Co., Ltd. and Qingdao Zhongjin Industrial Co., Ltd., and Binzhou Zhongjin Haoyun Real Estate Co., Ltd.) (2019-02)

[Case Number]The case number has not been made public.
[Trial Court]People's Court of Caidian District, Wuhan City, Hubei Province (case of damage liability dispute arising from the abuse of property preservation)
[Judicial Summary]Li * was awarded over 2.07 million yuan in compensation for a dispute over equity repurchase. However, just as the execution money was about to be transferred to the court's account and distributed, the company involved in the case filed a lawsuit and applied for pre-litigation property preservation to freeze the execution money. After the preservation ruling was revoked through review according to law, the company again sued for the "shareholder investment dispute" that had been dismissed by a valid judgment and applied for preservation again, freezing an amount that closely matched the execution money. Subsequently, both first- and second-instance courts rejected all of its litigation requests. The court held that the company applied for preservation at the precise moment when the execution money was about to arrive, and the amount it targeted was closely aligned with the execution money. This was not to ensure the execution of the new case, but rather to use preservation as a means to resist and delay the enforcement of the valid judgment, indicating clear intentional misconduct on the company's part. The court ordered the insurance company to first compensate Li * for interest losses of over 18,000 yuan within the guarantee limit, and the insufficient portion would be borne by the company itself.
[Source]The official website of the court system in Hubei Province (People's Court of Caidian District, Wuhan City: Property preservation must be cautious, and those who conduct improper preservation will be held accountable) (2024-06)

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limit. →\nLegal services for creditor-debtor disputes·Attorney Tian Jiaoyan·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.