Proview Was Charged by Its Lawyer for Fee Payment Failure

By You Yunting

According to a news report (note: the link is in Chinese), the iPad battle in China has ended in reconciliation with Apple’s payment of 60 million dollars to Proview by the agreement. However it seems that Proview will soon be trapped in another dispute afterwards and related to the battle, its agents of Grandall Law Firm (the “Grandall”) filed a lawsuit to the local court on the 23^rd of July, demanding the professional fee of 2.4 million dollars.

As introduced by the attorneys from Grandall, their entrustment by Shenzhen Proview was on a contingent fee, by which it could gain 4% of the total conciliation expenses or the compensation (namely 2.4 million dollars by the final settlement agreement). Also all the litigation fee or expenditures paid for custom record in the trademark battle was firstly paid by Grandall. However, after the end of the dispute, Proview refused to cash the fees into Grandall’s account as agreed and has even collected the money paid by Apple at the end of June.

Mr. Yang Rongshan, the founder of Shenzhen Proview, admitted in the interview that they had concluded with an attorney agreement, with contingent fee agreed; however whether Grandall will have the right to claim the priority to collect such fees than other debt shall be in accordance with the law. Yang also states that the fee will surely be paid on priority when Proview were on a healthy operation, while that might be argued and challenged by other creditors since Proview is in such a poor condition. He also stressed that the court will bring a fair and justice adjudication to the case and Proview will resolutely follow that decision.

The debt of Proview has totaled RMB 4 billion until now, but the reconciliation money paid by Apple this time is less than RMB 400 million, Proview is more likely to be declared bankrupt in recent. When the professional fee demanded in the case is finally disposed as ordinary credit, Grandall shall have to face the fact that it could only be paid USD 240, 000 in the end to the utmost by the distribution principle of insolvency clearance. Meanwhile it still has the chance to be cleared on priority and in full shall such fees are listed into the bankruptcy expenses or community debts. Although to this point, when the iPad trademark came to its end, Proview has not been put in the process of bankrupt procedure, which means the fee claimed by Grandall could not be listed as the bankruptcy fees.

Actually, due to the fact that Proview has not been declared bankrupt, lawyers of Proview in the case do confront the difficulty in law. For this reason, unless Proview agrees to pay the attorney fee in advance, otherwise the payment shall be disposed as ordinary debt after the lawsuit and Proview is put into the bankruptcy procedure. Here we question, should the contingent fee agreed in the case fair or adequate as normally it could be as highest as 30% in China.

To conclude we would like to excerpt relevant clauses in the Law of the People’s Republic of China on Enterprise Bankruptcy

Article 41 The following expenses that occur after the people’s court accepts an application for bankruptcy shall be the bankruptcy expenses:

(1) The legal fare on bankruptcy cases;

(2) The expenses for managing, conversion and distributing the debtor’s assets; and

(3) The expenses for the bankruptcy custodian’s fulfillment of its functions and duties, for its (their) remunerations and expenses for the recruitment of employees.

Article 42 The following debts that occur after the people’s court accepts an application for bankruptcy shall be community debts:

(1) The debts generated when the bankruptcy custodian or debtor requests the opposite party concerned to perform a contract that is not fulfilled completely by both parties concerned;

(2) The debts generated from the custodial management of the debtor’s assets;

(3) The debts generated from improper gains;

(4) The labor cost for the continuance of business operation, social insurance premiums as well as other debts as incurred therefrom;

(5) The debts generated from the damage that occurs during the performance of functions and duties by a bankruptcy custodian or other relevant personnel; and

(6) the debts generated from any damage due to the debtor’s assets.

Article 43 The bankruptcy expenses and community debts shall be paid off with the debtor’s assets at any time.

Where the debtor’s assets are not enough to pay off all the bankruptcy expenses and community liabilities, the bankruptcy expenses shall be paid off in priority.

Where the debtor’s assets are not enough to pay off the bankruptcy expenses or community liabilities, the liquidation shall be conducted in light of the relevant proportion.

Where the debtor’s assets are not enough to pay off the bankruptcy expenses, the relevant bankruptcy custodian shall apply with the people’s court for terminate the procedures for bankruptcy. The people’s court shall, within 15 days as of the day when an application is received, decide to terminate the procedures for bankruptcy and announce its decision as well.

Article 113 The insolvent assets shall, after the costs for bankruptcy liquidation and community liabilities are repaid in priority, be liquidated in light of the following sequence:

(1) The wages and subsidies for medical treatment and disability, comfort and compensatory expenses as defaulted by the bankruptcy, the fundamental old-age insurance premiums, fundamental medical insurance premiums that shall have been transferred to the employees’ personal account as well as the compensation fees for employees as prescribed by the relevant laws and administrative regulations;

(2) The social insurance premiums other than those as prescribed in the aforesaid provisions and tax fees as defaulted by the bankruptcy; and

(3) The common credits of bankruptcy.

Where the insolvent assets are not enough to meet the requirements for liquidation in a same sequence, it shall be distributed in light of the proportion.

The wages of the directors, supervisors as well as senior managers of an insolvent enterprise shall be calculated in light of the average wage of employees.

Lawyer Contacts

You Yunting

86-21-52134918

youyunting@debund.com, yytbest@gmail.com

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