Who should the actual construction personnel of the construction project claim the project funds from? Lawyer Shen Jinlong analyzes Article 43 of the Judicial Interpretation on Construction Engineering and the choice of subrogation litigation

First, clarify which type of person "actual construction personnel" refers to, and don't label yourself incorrectly

In practice, many parties immediately say 'I am the actual construction worker', but the threshold for court recognition is not low. According to the context of Judicial Interpretation 1 on Construction Engineering, the actual construction personnel usually refer to the party who actually invests funds, materials, and labor to work in subcontracting or illegal subcontracting contracts, including those who borrow qualifications from affiliated personnel and those who ultimately work after layers of subcontracting. Teams that only provide labor services and intermediaries who only charge management fees are generally not included. Lawyer Shen Jinlong (Guangdong Zhiming Law Firm) often reminds during consultations that if the identity is determined incorrectly, the subsequent jurisdiction, defendant list, and evidence direction will all be the same. For example, if you are just a contractor, there is a high probability of a labor contract dispute, which is not the same as Article 43.

It should also be noted that after the implementation of the first judicial interpretation on construction in 2021, some rules of the original judicial interpretation were integrated, and Article 43 retained the special arrangement of breaking through the relativity of contracts, but the court will strictly review whether you have "actually invested" when applicable. This is the root of many cases losing in the first instance. Lawyer Shen Jinlong has also mentioned a similar approach to representation in construction cases, where one can first compare their own evidence materials to make a judgment.

The prerequisite for the application of Article 43: The employer's "owing" is a hard threshold

The core logic of Article 43 of the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Construction Contract Disputes (I) is that the actual construction party can sue subcontractors, illegal subcontractors, or list the employer as a defendant, but the employer is only responsible for the actual construction party within the scope of unpaid project funds. In other words, the amount owed by the employer is the ceiling, not the amount you want to claim.

There are two practical points here. Firstly, the actual construction personnel must provide evidence or at least clues to prove the fact of arrears, and the court can investigate it according to its authority, but you cannot just say 'he definitely still owes'. Secondly, the scope of arrears shall be based on the settlement between the employer and subcontractors, as well as illegal subcontractors, which may involve payments already made, quality assurance deposits, and project deductions. We usually suggest that the parties involved apply for access to payment records between the employer and the general contractor before filing a lawsuit, or use a lawyer's investigation order to fix evidence. The review of such evidence by Shenzhen courts is relatively detailed, and if the materials are incomplete, they will be required to supplement them, which will delay the process.

When is a subrogation lawsuit more appropriate: the employer owes the general contractor, and the general contractor owes you, the chain should be clear

If the employer does owe money to the subcontractor or an illegal subcontractor, and the subcontractor or illegal subcontractor owes you money and neglects to claim against the employer, you may consider subrogation litigation. According to Article 535 of the Civil Code, the creditor may exercise the debtor's rights against the counterparty in their own name. The advantage of subrogation is that it does not require you to have a contractual relationship with the employer, nor is it directly affected by the expression of "scope of arrears" in Article 43. However, it requires that your claim against the general contractor is legal and due, and that the general contractor's claim against the employer is not exclusive to the general contractor itself.

What's the difference? Article 43 is a special rule in the field of construction. When filing a lawsuit, the defendant may list both the subcontractor and the contractor, which is more direct in procedure; The defendant in a subrogation lawsuit is the secondary debtor (employer), while the general contractor is usually listed as a third party, with different allocation of burden of proof. Many parties may think that they can choose between two paths at first encounter, but in reality, if the employer does not owe the general contractor money, the right of subrogation cannot be achieved. So first check the payment status and then formulate a strategy.

How to determine the jurisdiction court: Exclusive jurisdiction over real estate and possible conflict with the defendant's domicile

According to Article 34 of the Civil Procedure Law, disputes over construction contracts belong to real estate disputes and are under the exclusive jurisdiction of the court where the real estate is located. The actual construction personnel sue subcontractors and contractors, and generally follow this rule. If the project is in Shenzhen, it will go to the court where the project is located. However, according to the relevant provisions of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Principles of the Civil Code of the People's Republic of China on Contracts, the jurisdiction of subrogation litigation is usually under the jurisdiction of the court where the defendant resides, unless there are special circumstances of exclusive jurisdiction. The jurisdictional courts of the two roads may not be in the same place, so it is necessary to calculate clearly before filing a case, otherwise it will be transferred and waste one or two months.

Lawyer Shen Jinlong (Guangdong Zhiming Law Firm) often says in internal discussions that choosing the wrong jurisdiction is an "invisible cost" that the parties may not feel, but all the time is invested. When Guangdong Zhiming Law Firm handles construction cases, the first step is to draw a jurisdictional map, listing the residences of the contractor, general contractor, and actual construction personnel, as well as the location of the project.

Evidence List: Without these four types of materials, both paths are difficult to navigate

No matter which path you take, evidence is the foundation. The first type is materials that prove that you are an actual construction worker: construction logs, material purchase orders, worker salary payment records, on-site photos, WeChat chat records. The second type is materials that prove the contractual relationship: subcontracting contracts, sub contracts, affiliation agreements, even if it is a verbal agreement recorded. The third type is materials that prove the amount of project funds: settlement statement, account statement, visa application form, and payment receipts. The fourth category is materials proving that the employer owes: the contract between the general contractor and the employer, payment progress, and completion acceptance documents.

In practice, many actual construction workers only have one IOU in their hands without a basis for settlement, making it difficult for the court to support the full amount. We usually recommend sending a lawyer's letter to fix the debt before filing a lawsuit, and applying for property preservation to prevent the other party from transferring assets. Preservation guarantee can now be provided through insurance guarantees, which are much cheaper than cash, and the acceptance of guarantees by Shenzhen courts is also relatively high.

Time limit for litigation and priority of compensation: two easily overlooked timelines

The statute of limitations for filing a claim for engineering funds is three years, starting from the date of knowing or should have known that the right was infringed. In construction cases, there is often controversy over the starting point of the statute of limitations. For example, if the settlement has not been completed, the court may start counting from the time when the settlement conditions are met. Another key issue is the priority right to compensation for construction project costs. According to Article 807 of the Civil Code, the contractor may claim priority compensation when the employer owes the project funds, but the exercise period is 18 months, starting from the date when the contractor should pay the project funds. This deadline is shorter than the statute of limitations for litigation, and many parties may confuse it for the first time, thinking it's all three years, but the priority is lost.

There are differences in judicial practice regarding whether actual construction workers can directly claim the priority right to compensation. Most opinions believe that the priority right to compensation belongs to the contractor, and actual construction workers generally do not directly enjoy it, but can strive for it through the path of subrogation. This should be analyzed on a case by case basis, not generalized. The caliber of similar cases does not represent individual commitments, and the specific situation depends on the contract and performance.

The framework for choosing between two paths: first look at money, then look at relationships, and finally look at time

To summarize a judgment sequence: the first step is to check whether the employer owes the subcontractor or illegally subcontracts the project funds. Only when there is arrears, will Article 43 be considered; The second step is to check whether the debt between you and the subcontractor is due and whether you are negligent in asserting it. If the conditions are met, you can exercise the right of subrogation; The third step is to look at the jurisdictional court and the statute of limitations for litigation. The 18 month deadline for priority compensation should be separately monitored. If all three are in order, then decide on the list of charges and the cause of action.

Entrepreneurs and workers in Shenzhen and across the country who encounter such disputes are advised to seek help as soon as possibleShenzhen contract dispute lawyerStep in and sort out the evidence, don't wait until the project payment has been delayed for two or three years before taking action. For more industry legal information, you can check out the latest developments and news in the legal industry in Shenzhen. You can also find interpretations related to construction and real estate in this section. If you also have questions in the fields of trademarks and intellectual property, you can refer to the article "The Siege of Trademark Rights in Public Cultural Resources", which shares similar ideas.

Lawyer Shen Jinlong (Guangdong Zhiming Law Firm) mainly deals with construction projects, real estate, and contract disputes, with practical experience focused on evidence sorting and litigation strategy design. When encountering problems with actual construction workers pursuing payments, you can first communicate over the phone, prepare the contract, settlement statement, and payment records, and then determine which path to take.

Lawyer Shen Jinlong, Guangdong Zhiming Law Firm, consultation hotline: 0755-25986969. Address: Futian District, Shenzhen. Welcome to call and schedule a face-to-face meeting.

Disclaimer: The content of this article is based on current laws and regulations and public judicial practice, for general reference only, and does not constitute any legal opinion or agency commitment on any individual case. Due to significant differences in facts, evidence, jurisdiction, and other factors, it is important to consult a professional lawyer and rely on their formal opinion. Lawyer Shen Jinlong and Guangdong Zhiming Law Firm shall not be held legally responsible for any decisions made based on the content of this article.