[Key Point of Judgment]
The transaction mode in which the lessee, in orderto realize financing, transfersthe ownership of its self-owned property to the lessor, leases such property from the lessor for its use, and pay the lessor rentalon schedulemay constitute a financial leasing legal relationship.
[Basic Facts]
On April 10, 2013, ZHAO, X and Borland Company signed “Vehicle Purchase and Sales Contract”, agreeing that ZHAO, Xtransfers the car under his name to Borland company at the price of 174,001yuan;Borland Company pays the transfer fund in two installments, with the first-installment payment being174,000 yuan on the same day when the contract was signed and the payment of second-installmenttransfer fund being RMB1before the expiration of the lease term. On the same day, the aforesaid two parties signed “Financial Lease Contract”, agreeing that ZHAO, Xleased back the car it transferred to Borland Company at the rental of174,000yuan for aterm of thirty-six (36) months, with the monthly rental of 5,452.13yuan being paid ten (10) days before each month; after the term of lease expires and ZHAO, X pays the nominal price of 1 yuan, the car should be owned by ZHAO, X. Since the car is occupied and used by ZHAO, X, ZHAO, Xis not required to deliver the car to Borland Company first and then to get it from the Borland Company. Where ZHAO, X failed to pay full rental on schedule, Borland Financial LeasingCompany shall have the right to require a lump-sum payment of the remaining undue rental payable by ZHAO, X and collection of liquidated damages at 8% of the remaining outstanding rental.After execution of the contract, Borland Company paid 174,000yuan to ZHAO, X.After paying 10-installment rental, ZHAO, X did not pay rental to Borland Company. Therefore, Borland Company sued ZHAO, X for paying the remaining unpaid rental in the amount of119,946.86 yuan and liquidated damages.
Ruling
This court holds that ZHAO, X sold the car under his name to Borland Company and leased the same therefrom according to the financial lease contract, which constitutes financial leasing legal relationship of after-sales lease-back kind. The contract for vehicle sales and purchase and vehicle lease contract signed by both parties are expression of their true intention and not breakingany effect prohibitive provisions of law or administrative regulation.Both parties to the contract shouldfully fulfill their obligations. ZHAO, Xdid not make timely and full payment of the rental and constituted a breach of contract. In this case, BorlandCompany shall have the right to request ZHAO, X’s payment of the remaining unpaid rental and liquidated damages, with the car belonging to ZHAO, X.
[Significance]
Financial leasing is an opened up industry in the field of the financial services sector in Qianhai Cooperation Zone and Free Trade Zone. Institutional innovation has stimulated the vitality of the market in said field, Till the end of May 2015324 financial leasing companies have been establishedin Qianhai Cooperation Zone, accounting for 95% of those established in Shenzhen and 17% of those in the country. The financial leasing enterprise’s business includes the traditional direct financial leasing and after-sales lease-back. Compared with direct leasing, after-sales lease-back is not a typical way of financial leasing. After-sales lease-backrefers to a way of financial leasing in which the lessee sells its self-owned property to the lessor and signs a financial leasing contract with the lessor, and then borrowedsaidproperty from the lessor. In this case,the people’s court holds a positive attitude towards non-typical after-sales lease-back . The method of after-sales lease-backallows the equipment manufacturing enterprises or asset owners to acquire fund when retaining the use right of their assetand provids the lessor with investment opportunities.Asset ownersreuse this their idle fund in such way and use only a small part of their capital to pay the rental for use of said fund.
Although the real after-sales lease-back transactions can constitute a means of financial leasing, the parties to certain transactionsexecute a contract in the name of after-sales lease-back, the essence of which does not comply with the relationship of the lessor’s and the lessee’s rights and obligations as provided in Article 237 ofthe Contract Law of the People’s Republic of China but is a disguise used to avoid violation of relevant law provisions and policy in the name of after-sales lease-back. For example, there is no real orspecific leased property, the leased property is of a low value but is purchased at a higher price according to the after-sales lease-back contract, or the leased property is free of encumbrance, so that the lessor is unable to obtain the ownership of the leased property or to realize the guarantee function of the leasedproperty, orthe lessor fails to complete the relevant procedures for gaining the ownership of the leased property. The abovementionedcircumstances will have impact on the determination of the financial leasing legal relationship and the validity of the contract to different extent. Therefore, when the parties enter into the after-sales lease-back financial lease contract, they should comprehensively check whether the leasedproperty exists in reality, whether the value of the leasedpropertyis equivalent to the rental and whether the text of purchase and sales contract is made with respect to the leased property, in order to avoid the situation where such information fails to be ascertained by the court when a lawsuit is filed against the contract-related dispute.
