Arbitration Clauses & Insolvent Winding Up Proceedings: The Cayman Anomaly

Introduction

In FamilyMart the Privy Council confirmed that distinct legal and factual issues raised in just and equitable winding up proceedings are arbitrable.[1]  It follows that arbitration clauses covering such matters are enforceable, and that proceedings brought in breach of arbitration clauses will be stayed.[2]

FamilyMart did not address insolvent winding up proceedings.  The issue there surfaces when a creditor seeks to wind up a company in reliance on a debt arising from a contract containing an arbitration clause.  The Grand Court has recently addressed that issue in Re BPGIC Holdings Ltd.[3]  In following earlier cases which held that the Court should inquire into the genuineness of a dispute raised by the debtor company,[4] this decision conflicts with the pro-arbitration tenor of FamilyMart and exposes an anomaly in Cayman’s arbitration regime, which is bifurcated between foreign and domestic arbitrations.

This article begins by providing an overview of relationship between arbitration and insolvency.  It then describes the approach that the English Courts have adopted, as this is vital context for what follows.  Next, it summarises BPGIC Holdings and the cases that precede it.  It then compares and contrasts the Cayman approach with that of other jurisdictions.  Finally, it explores some factors the Courts may wish to consider in future cases.

The Inherent Tension Between Arbitration and Insolvency

It has long been recognised that arbitration and insolvency do not sit comfortably together.  One US Court of Appeals has described their relationship as “a conflict of near polar extremes.”  Insolvency policy “exerts an inexorable pull towards centralization while arbitration policy advocates a decentralized approach towards dispute resolution.” [5]

This tension is particularly acute during winding up proceedings.  If a recalcitrant party ignores an arbitration clause and files proceedings, arbitration law is meant to intervene.  In most jurisdictions, the Court must stay proceedings unless it finds that the arbitration clause is “null and void, inoperative, or incapable of being performed” (referred to below as the “mandatory stay”).  That language has its origins in the New York Convention,[6] and was carried through to the UNCITRAL Model Law on International Commercial Arbitration.

This consistency in wording across jurisdictions is helpful, and Courts often refer to decisions in other jurisdictions to see how they have approached similar issues.  The Privy Council did just this in FamilyMart.  But this approach can also be apt to mislead.  That is because in some jurisdictions, the mandatory stay includes some variation of the following additional italicised words: “null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred”.  As noted below, this wording suggests that the Court should engage in at least a cursory review of the merits before referring a dispute to arbitration.  Cayman finds itself in an unusual position.  Intentionally or not, the law governing foreign arbitrations – the Foreign Arbitral Awards Enforcement Act (1997 Revision) (“FAAEA”) – contains these addition italicised words.[7]  The more modern law governing domestic arbitrations – the Arbitration Act (2012) – does not.

Subject to how widely the Courts apply it, the mandatory stay serves as a significant impediment to the presentation of a winding up petition.  Ordinarily, a party seeking to enforce a debt does not need to prevail in full-blown civil proceedings before filing a petition.  A putative creditor[8] can serve a statutory demand and effectively shift the burden to the alleged debtor to satisfy the Court that the debt is disputed in good faith and on substantial grounds.[9]  Even if the debt is genuinely disputed, the alleged debtor may still be in trouble.  The Court has a residual discretion to wind up a company on the basis of a disputed debt if there is other evidence of insolvency.[10]  Moreover, the procedural rules allow for the substitution of the petitioner, meaning another creditor can take over the proceedings if the first creditor settles or hits a road-block.[11]

In contrast, if the alleged debtor can rely on an arbitration clause, it materially changes the dynamic.  They can halt the winding up proceedings before any of those procedural disadvantages are engaged.  In arbitration, they are entitled to a full adjudication of their dispute, in private, with the burden remaining on the putative creditor throughout.  What’s more, the practical reality is that completing an arbitration is likely to take many months, if not years.  Contrast that with a winding up petition that can, in the insolvency context, usually be heard in short order.  In Cayman, creditors’ winding up petitions are supposed to be heard within six weeks of filing.[12]  If, on the other hand, the arbitration clause is enforced, it is only once an award has been issued that a winding up petition can finally be filed.

The English Approach

Regardless of which jurisdiction the issue arises, it is impossible to escape the decision of the English Court of Appeal in Salford Estates (No 2) Ltd v Altomart Ltd.[13]  There, the Court held that the mandatory stay in the UK Arbitration Act 1996 does not technically apply to winding up proceedings.  However, it noted that the Courts retain a discretion under insolvency laws to stay or dismiss winding up proceedings.[14]  Importantly, that discretion had to be exercised with the Arbitration Act – and its policy aims – firmly in mind.  Accordingly, a stay would be granted whenever a debt was disputed, even if the summary judgment standard could be met.  Put differently, a stay would be granted even if the creditor could satisfy the Court that the debtor company did not have an arguable defence.

In some ways that result is striking.  In others, it makes perfect sense: If a summary judgment type analysis was permitted, it would encourage parties to use winding up proceedings to attempt to by-pass their agreement to arbitrate.[15]  The Court did leave open the possibility that stay could be refused in “exceptional circumstances”, but such circumstances were “difficult to envisage”.[16]

Following Salford Estates, the English approach is unyieldingly pro-arbitration.  The High Court has noted that the effect of Salford Estates is to “place a very heavy obstacle in the way of a party who presents a petition claiming sums due under an agreement that contains an arbitration clause.”[17]  The approach is so uncompromising that even a previous admission that a debt is owing does not constitute “exceptional circumstances”, meaning that it needs to be arbitrated first if winding up proceedings are to follow.[18]

From a Cayman perspective, it is important to understand the limitations of Salford Estates.  The UK Arbitration Act’s mandatory stay has the standard narrow framing and does not contain the additional italicised words discussed above.  Importantly though, prior to 1996, the UK Act did contain these additional words.  In its decision, the Salford Estates Court relied heavily on an earlier decision in Halki Shipping Corp v Sopex Oils Ltd, which held that by choosing to remove these words from the 1996 Act, Parliament decided to limit the Court’s ability to engage in a summary judgment type analysis.[19]  As discussed, the Salford Estates Court obliged.  The Cayman legislature has followed that approach for the Arbitration Act but not the FAAEA.  And as we return to below, it logically follows that Salford Estates could only cleanly be relied on by a Cayman Court deciding a domestic arbitration case under the Arbitration Act.

BPGIC Holdings and the Earlier Cayman Cases

That leads neatly to the decision of Chief Justice Ramsay-Hale in BPGIC Holdings.

The Facts and Issue

In the case, a company applied to strike-out a winding up petition on the basis that the predicate debt was disputed, and that the proceedings were brought in breach of an arbitration clause requiring arbitration in London.[20]  Because the seat of the arbitration was not in Cayman, the FAAEA applied.  In response, the petitioner argued that the debt was not bona fide disputed on substantial grounds, meaning the Court should refuse to stay the proceedings.[21]

The Court, in deciding this legal point as a preliminary issue, lucidly summarised the issue as: “whether the petition should be stayed or dismissed pending resolution of the disputed debt by a foreign arbitral tribunal without an inquiry by this Court as to whether the debt is genuinely disputed on substantial grounds.”[22]

The Arguments

In support of its argument that the Court should not inquire into whether the debt is bona fide disputed on substantial grounds, the company relied on Salford Estates and on the decision of Foster J in Re Times Property Holdings Ltd.[23]  There, a company had allegedly defaulted on a subscription agreement containing an arbitration clause. In finding that winding up proceedings ought to be stayed pending arbitration, Foster J reasoned that:[24]

Where, as here, parties have expressly agreed that any dispute between them arising out of the relevant contract is to be determined in a particular forum by a particular tribunal, it is not obvious to me why they should not be held to that agreement.

In BPGIC Holdings, the company did not address the difference in language between the FAAEA and the Arbitration Act, save for arguing that it would “produce incoherent and inconsistent results” if different standards of review were adopted.[25]

The petitioner responded by relying on the decision of Parker J in Re Grand State Investments Ltd.[26]  There, the Judge cited the above passage from Times Property Holdings and noted that “the freedom of parties to choose dispute resolution mechanisms” underpinned Salford Estates.[27]  His Lordship then recorded that “the starting point for the court in assessing how to exercise its discretion will be to ensure that the parties’ freedom to choose a dispute resolution mechanism is respected”.[28]  Nevertheless, Parker J then defaulted to concluding that the Court would still need to be satisfied as to the existence of a bona fide dispute on substantial grounds before exercising its discretion to stay proceedings in favour of arbitration.[29]  We return to this reasoning below.

The petitioner also pointed out that the FAAEA’s mandatory stay is framed in different terms to the UK provision and that this appeared to reflect a different legislative policy choice in this jurisdiction.[30]

The Decision

In finding that the Court needed to be satisfied there was a bona fide dispute on substantial grounds before staying the winding up proceedings, the Chief Justice effectively made three related points.

First, her Chief Justice found that a BVI decision on which Foster J relied in Times Property Holdings was erroneous, as the BVI Judge had himself admitted in a later case.[31]  There is a certain irony in this because, as we note below, BVI now firmly rejects Salford Estates.

Secondly, and the reason why the BVI decision was said to be erroneous, the Chief Justice drew a distinction between consideration of whether there is a bona fide dispute on substantial grounds, which she framed a threshold question, and actually adjudicating that dispute.[32]  For this reason, the Chief Justice rejected the suggestion the Court was carrying out a summary judgment type analysis.  That is because, if it concludes there is a bona fide dispute, that dispute would then be resolved in the appropriate forum.  As we note below, this line of reasoning has been debated in other jurisdictions.

Thirdly, the Chief Justice pointed out that the wording of the mandatory stay in the FAAEA reflects a different legislative policy than in the UK.  Indeed, she expressly acknowledged that her approach “may be inconsistent with the internationalism endorsed by the Privy Council in Family Mart”.[33]  While the Chief Justice departed from earlier obiter remarks that the FAAEA’s mandatory stay was materially the same as the UK equivalent,[34] her analysis here is unquestionably correct when viewed in light of the commentary in Salford Estates and Halki Shipping Corp.

How Does the Cayman Approach Compare to Comparable Jurisdictions?

We return to the decision in BPGIC Holdings and the Cayman approach below.  However, to assist with that, it is helpful to provide an overview of how other jurisdictions have approached this same issue.  It is easiest to classify jurisdictions into those that follow Salford Estates and those that do not.

BVI: Rejects Salford Estates – For Now

Salford Estates and its uncompromising approach has not been universally accepted.  Of particular relevance to Cayman is BVI, which has expressly declined to follow the English approach.  That is despite its mandatory stay taking the exact same form as the UK Arbitration Act – having also been amended to remove the additional italicised words.

The leading decision is that of the Eastern Caribbean Court of Appeal in Jinpeng Group Ltd v Peak Hotels and Resorts Ltd.  There, the Court stressed the collective nature of winding up proceedings. It noted they are “a class remedy and not a private [one] between the petitioner and the company.”[35]  That can be contrasted with arbitration which involves a private dispute between contracting parties.[36]  The Court further reasoned that the “statutory jurisdiction to wind up a company based on its inability to pay its debts as they fall due unless the debt is disputed on genuine and substantial grounds” is “too firmly a part of BVI law”.[37]

Since Jinpeng Group, several first instance decisions have arguably brought the position closer to English approach.  In Rangecroft Ltd v Lenox International Holdings Ltd, the Eastern Caribbean Supreme Court distinguished Jinpeng Group in the statutory demand context.[38]  For context, BVI has a standalone procedure to challenge statutory demands, which is the first of two steps in the winding up process.  That first step is “a pure party-and-party dispute” which, unlike winding up proceedings, does not involve collective interests.[39] The Court therefore held that applications to set aside statutory demands should be subject to the mandatory stay.[40]  A subsequent decision extended this logic to winding up proceedings in which there are no supporting creditors, or other evidence of insolvency.[41]  The Court noted that in this context, it would undermine the policy aims of the Arbitration Act if the Court was to assess the dispute using the ordinary bona fide dispute on substantial grounds standard.[42]  The Court did, however, clarify in a later case that these points went to the general exercise of discretion and did not actually takeaway from the need to assess the genuineness of the dispute.[43]

Like Hong Kong (discussed below), further clarity on BVI’s position will shortly be forthcoming.  The Privy Council has recently granted leave to hear an appeal on this issue in Sian Participation Corp v Halimeda International Ltd.[44]

Singapore: Largely Follows Salford Estates

Salford Estates has largely been followed in Singapore.  In AnAn Group (Singapore) Pte Ltd v VTB Bank, the Singapore Court of Appeal conducted arguably the most nuanced analysis to date.[45]  The Court was deciding which standard of review it should adopt when a party relies on an arbitration clause in the winding up context.  The term “standard of review” here refers to the extent to which a Court will be willing to consider the relative merits of the dispute.  The options were the less demanding the prima facie standard, which is used for stay applications in the arbitration context, or the higher ‘triable issues’ standard, which is used in the winding up context. The latter mirrors the bona fide dispute on substantial grounds test used in other jurisdictions like Cayman.

The Court reviewed developments in other jurisdictions and concluded that the lower prima facie standard should apply.  It agreed with Salford Estates that the standard of review should not “depend solely on the creditor’s arbitrary or tactical choice” as to whether to attempt to pursue ordinary civil proceedings or winding up proceedings.[46]  It disagreed with Jinpeng Group that the collective nature of winding up proceedings leads to a different answer.  It pointed out that this approach puts the cart before the horse because it presupposes the existence of a debtor-creditor relationship, when that is a matter the parties have agreed to arbitrate.[47]  It is only after disputes have been adjudicated and the debt remains unpaid “that it can be said that the company is insolvent, such that the collective interest of the insolvent company’s creditors becomes a relevant consideration.”[48]

Having determined the applicable standard, the Court then established the boundaries of the test. Departing from the bright-line approach in Salford Estates, the Court acknowledged that there needs to be a controlling mechanism to prevent bad faith invocations of arbitration clauses.  It favoured abuse of process as this mechanism, which it emphasised has a “very high” bar.[49]  One example of where this bar would be met is where a debt has previously been admitted as to both liability and quantum.  Another is where there are substantiated concerns that justify the immediate invocation of insolvency processes, such as where assets have been misappropriated and there is a need to appoint an independent person to investigate.[50]

The AnAn Group approach was further explained and refined by the Court of Appeal in Founder Group (Hong Kong) Ltd v Singapore JHC Co Pte Ltd.  In that case, the Court rejected the argument that AnAn Group was only relevant to the substantive determination of the winding up application, rather than to the threshold question of whether the petitioner is in fact a creditor.  The Court explained that it is relevant to both questions, and indeed where there is an arbitration clause, the petitioner will normally fall at the first hurdle of standing:[51]

where a debt is subject to a dispute that falls within the scope of an applicable arbitration clause… the claimant cannot be considered to be a creditor of the defendant until that dispute has been resolved by arbitration in the claimant’s favour.  The claimant will therefore have no standing to present a winding-up application as a creditor until then.  In our judgment, it is for that reason that the court will ordinarily dismiss, or exceptionally stay the application, provided that there has been no abuse of process on the defendant’s part

On the facts of that case, the appeal succeeded for the separate reason that arbitration clause itself was not enforceable.[52]

Hong Kong: It Currently Depends Which Judge Hears the Case

Of all the jurisdictions that have considered this issue, it has played out – and continues to play out – most colourfully in Hong Kong.  Earlier authorities held that arbitration clauses had no effect on the applicable standard when the Court assesses disputed debts during winding up proceedings.[53] As with the other jurisdictions noted above, the Court simply asked whether there was a bona fide dispute on substantial grounds.[54]

That position was reconsidered by the Court of First Instance in Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd.  Key to Harris J’s reasoning in that case was unpicking what the Judge saw as a flawed assumption underpinning prior authority: It does not follow from the collective nature of winding up proceedings that an individual creditor should to be released from its own contractual commitments.  That is because, in reality, creditors do not act “out of some altruistic concern for the creditors of the company generally”.  They do so because they believe it is “the most efficacious method of obtaining payment”.[55]  Instead, the Judge favoured an approach that mirrored Salford Estates, except in two respects.  First, he imposed an additional requirement that the defendant company substantiate its position by taking “the steps required under the arbitration clause to commence the contractually mandated dispute resolution process.”[56]  Secondly, the Judge recognised that there would be (non-theoretical) exceptional circumstances where immediately commencing winding up proceedings would be justified.  Again, the example was given of where assets had been misappropriated and there was a need to appoint an independent person immediately.[57]

Lasmos itself has not been universally accepted.  In obiter remarks, the Court of Appeal cast considerable doubt on it in But Ka Chon v Interactive Brokers LLC.[58]  Kwan VP expressed agreement with the sentiment in Jinpeng Group that the existing test for winding up was too firmly established in Hong Kong law.[59]  Further doubt was cast on it in the Court of First Instance’s decision in Dayang (HK) Marine Shipping Co, Ltd v Asia Master Logistics Ltd.[60]  There, William Wong SC, sitting as a Deputy High Court Judge, conducted a lengthy analysis in which he reasoned – along similar lines to Ramsay-Hale CJ in BPGIC Holdings – that Salford Estates and Lasmos proceeded on the false assumption that by conducting a summary judgment type analysis during winding up proceedings, the Court disregards the parties’ chosen dispute resolution mechanism.[61] Judge Wong was “unequivocally” of the view that presenting a winding up petition does not constitute a breach of an arbitration clause.[62]  That is because the Court does not finally resolve the dispute between the parties.  That is done later during the liquidation claims process.[63]  Interestingly, that argument was rejected in AnAn Group on the basis that making a winding up order simply results in the adjudication function being “offload[ed]” to the liquidator, despite it properly belonging to an arbitrator.[64]  Nevertheless, for this reason and others, Judge Wong concluded that “the existence of the arbitration agreement is neither here nor there.”[65]

More recently, in Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP, the Court of Final Appeal held that, as it related to exclusive jurisdiction clauses, “absent countervailing factors such as the risk of insolvency affecting third parties and a dispute that borders on the frivolous or abuse of process, the petitioner and the debtor ought to be held to their contract”.[66]  While the Court itself declined to extend this conclusion to arbitration clauses,[67] some have speculated that the Court will ultimately apply similar reasoning.

There have subsequently been conflicting Court of First Instance decisions as to whether to apply Guy Kwok-Hung Lam to arbitration clauses.  In Simplicity & Vogue Retailing (HK) Co Ltd, Linda Chan J declined to revisit the established pre-Lasmos approach in light of Guy Kwok Hung Lam.[68] In Re Shandong Chenming Paper Holdings Ltd, Harris J unsurprisingly reached the opposite conclusion.[69]  The Court of Appeal is due to hear an appeal of the decision in Simplicity & Vogue Retailing (HK) Co Ltd on 29 February 2024, so further clarity may finally be forthcoming.[70]

Where Might the Cayman Courts Land?

With all of that in mind, we highlight four points that may guide the Cayman Courts in determining what approach they ultimately adopt.

First, prior to BPGIC Holdings, the Cayman Courts could be set to have arguably attempted to have it both ways.  Cases such as Grand State Investments suggested that the Court would attempt to give effect to the parties’ chosen dispute resolution mechanism.  However, they then went on to apply the exact same test – a bona fide dispute on substantial grounds – that would be applied regardless of whether or not there was an arbitration clause.  In openly recognising that the FAAEA requires a different approach, BPGIC Holdings is commendable in the consistency and transparency of its reasoning.

Secondly, however, that does not mean the approach in BPGIC Holdings is not open to challenge.  Even if one accepts that under the FAAEA, the Court is required to engage in at least a cursory review of the merits, it does not necessarily follow that the Court should to revert to its usual test in the winding up context.  It is not a binary choice.  Reverting to the usual standard arguably ignores that even the FAAEA reflects a policy choice to buy into the pro-arbitration enforcement regime required by the New York Convention.  The points made by the Privy Council in FamilyMart still have at least some relevance.[71]  So how to square the two?  Some assistance can be gleaned from the New Zealand Supreme Court’s decision in Zurich Australian Insurance Ltd v Cognition Education Ltd, which grappled with this very question albeit in another context.[72]  In light of the policy favouring the enforcement of arbitration clauses, the Court adopted a narrow interpretation of the additional words, also found in New Zealand’s Act, finding that that a stay should only be declined where it is “immediately demonstrable either that the defendant is not acting bona fide in asserting that there is a dispute or that there is, in reality, no dispute.”[73]  The function of the additional words is “to filter out cases where the defendant is obviously simply playing for time.”[74]  Thus, it would be open to the Cayman Courts to adopt similar reasoning and adopt a hybrid standard of review under the FAAEA which asks whether it is immediately demonstrable there is not a bona fide dispute.[75]  That would be more demanding for petitioners seeking to avoid arbitration than the usual standard, avoiding the sort of mini-trials winding up hearings sometimes threaten to become.  Adopting a hybrid standard may also help address the problem identified in Salford Estates and AnAn Group that winding up proceedings should not be used as a tactical mechanism to try to skirt a binding dispute resolution clause.

Thirdly, and relatedly, whether it was intentional or not, the Cayman Courts cannot ignore that the mandatory stays in the FAAEA and the Arbitration Act are worded differently.  As matters stand, the legislature will either need to bring these two Acts into line, or the Courts will need to engage in a greater degree of scrutiny of disputes for foreign-seated arbitrations than domestic ones.  As a policy matter, there is little logic to that.  While BPGIC Holdings does not expressly discuss the Arbitration Act, it is apparent that the Chief Justice was cognisant of this tension. Indeed, her Lordship quoted the company’s argument the approach which was ultimately adopted would lead to “incoherent and inconsistent results”.

Fourthly, the Arbitration Act has the same wording as the UK Arbitration Act.  It would therefore be open to the Cayman Courts to follow Salford Estates in that context.  However, they do not need to go that far.  AnAn Group arguably represents a more tolerable position in that it strives to hold parties to their bargain to arbitrate disputes, while also recognising that there will be (non-theoretical) circumstances in which debtor companies engage in abusive conduct.  The softer edges of the AnAn Group test are likely to sit more comfortably with the Cayman Courts that are understandably eager to provide some protection to creditors.

Key Takeaways

• At present, if an arbitration clause requires arbitration seated in a foreign country, creditors may still commence winding up proceedings if the debtor company cannot meet the bona fide dispute on substantial grounds standard.
• There is at least an argument that the above approach is erroneous and that the Court should adopt a hybrid standard, placing more emphasis on the importance of enforcing arbitration clauses and generally on party autonomy.
• If an arbitration is to be seated in Cayman, it remains to be seen whether the Courts will follow Salford Estates or some variation of it, such as the Singaporean approach in AnAn Group.
• Regardless of the approach the Courts adopt, the legislature should consider bringing the standards in the FAAEA and the Arbitration Act into line, whether in favour of arbitration or more Court supervision, as there appears to be little policy justification for the current discrepancy and this will bring much needed certainty.

Clearly, this remains a developing area of law and there are various issues that are yet to be determined by the Grand Court, let alone the appellate courts.  In the meantime, this area is ripe for further litigation and it is hoped that the commentary in this article will be of use.

[1] FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corp [2023] UKPC 33.
[2] Note that the cases generally use the term “arbitration agreements” but this typically refers to an arbitration clause in a substantive contract.  The term “arbitration agreements” is used to signify that the validity of an arbitration clause is assessed separately from the validity of the substantive contract containing it.  This is called the doctrine of separability.
[3] Re BPGIC Holdings Ltd (unrep., 20 November 2023, Ramsay-Hale CJ).
[4]  As discussed below, the Chief Justice followed the approach adopted in Re Duet Real Estate Partners 1 LP (unrep., 7 June 2011, Jones J) and Re Grand State Investments Ltd [2021] CIGC J0428-2.  Her Lordship declined to follow Re Times Property Holdings Ltd [2011(1) CILR 223], and implicitly Re Adenium Energy Capital Ltd (unrep., 29 July 2020, Richards J), albeit that latter case does not appear to have been brought to the Judge’s attention.
[5]  In re US Lines Inc 197 F 3d 631(2nd Cir 1999) at 640.  For a recent discussion of the relationship between arbitration and insolvency, see the decision of the Supreme Court of Canada in Peace River Hydro Partners v Petrowest Corp 2022 SCC 41 at [44]-[74].
[6]  Also known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
[7]  FAAEA, s 4.  By foreign arbitrations, we mean arbitrations that are seated outside of Cayman.  This does not refer to where the arbitration is physically held but rather which jurisdiction’s laws govern the procedure of the arbitral process.
[8]  We use terms like “putative creditor” and “apparent debtor” to signify that the existence of a debtor-creditor relationship remains at issue in these disputes.
[9]  See for example Parmalat Capital Finance v Food Holdings [2008] UKPC 23 at [9]; and Re GFN Corp Ltd [2009] CILR 650 at [94].
[10]  In Parmalat Capital Finance v Food Holdings [2008] UKPC 23 at [9], Lord Hoffman noted at that “there is no doubt that the court retains a discretion to make a winding up order, even though there is a dispute”.
[11]  Order 3, r. 3 of the Companies Winding Rules provides that “The Court may, on such terms as it thinks just, substitute as petitioner any creditor who in its opinion would have a right to present a petition and who is desirous of doing so.”
[12]  Financial Services Division Guide (2nd ed) at [C5.1].
[13]  Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575, [2015] 3 WLR 491.
[14]  At [39].
[15]  At [40].
[16]  At [39].
[17]  Eco Measure Market Exchange Ltd v Quantum Climate Services Ltd [2015] EWHC 1797 (Ch) at [10].
[18]  Fieldfisher LLP v Pennyfeathers Ltd [2016] EWHC 566 (Ch), [2016] BCC 697 at 704.  See also Telnic Ltd v Knipp Medien Und Kommunikation GmbH [2020] EWHC 2075 (Ch) at [27] and [31].
[19]  Halki Shipping Corp v Sopex Oils Ltd [1997] EWCA Civ 3062
[20]  Re BPGIC Holdings Ltd at [1].
[21]  At [2].
[22]  At [3].
[23]  While not cited in BPGIC Holdings, we note for completeness that there is a further judgment which applied Salford Estates in Re Adenium Energy Capital Ltd (unrep., 29 July 2020, Richards J).  The Judge did, however, find at [73] that the circumstances in that case were sufficiently exceptional not to refer the parties to arbitration.
[24]  Re Times Property Holdings Ltd [2011(1) CILR 223] at [19].
[25]  Re BPGIC Holdings Ltd at [20].
[26]  The petitioner also relied on the earlier decision in Re Duet Real Estate Partners 1 LP (unrep., 7 June 2011, Jones J), which reached a similar result albeit in a more summary fashion.
[27]  Re Grand State Investments Ltd [2021] CIGC J0428-2 at [70].
[28]   At [73].
[29]  At [74].
[30]  BPGIC Holdings Ltd at [16]-[19].
[31]  At [21]-[24].
[32]  At [27]-[28].
[33]  At [29].
[34]  Re Cybernaut Growth Fund LP [2014 (2) CILR 413] at 420; and Deutsche Bank AG London v Krys [2016] CICA J0202-1 at [27].
[35]  Jinpeng Group Ltd v Peak Hotels and Resorts Ltd [2015] ECSC J1208-4 at [44], citing C-Mobile Services Ltd v Huawei Technologies Co Ltd (unrep., 15 September 2015, Pereira CJ).
[36]  At [45].
[37]  At [47].
[38]  Rangecroft Ltd v Lenox International Holdings Ltd [2020] ECSC J0706-2.
[39]  At [17].
[40]  At [18].
[41]  Is Investment Fund Segregated Portfolio Company v Fair Cheerful Ltd [2020] ECSC J0716-3.
[42]  At [7].
[43] A Creditor v Anonymous Company Ltd [2021] ECSC J0128-5 at [13]-[15].
[44] Disagreeing with the decision of the Eastern Caribbean Court of Appeal to refuse leave in Sian Participation Corp v Halimeda International Ltd [2023] ECSC J0424-2.
[45]  AnAn Group (Singapore) Pte Ltd v VTB Bank [2020] SCGA 33.
[46]  At [63].
[47]  At [71].
[48]  At [71].
[49]  At [97]-[100].
[50]  At [99].
[51] Founder Group (Hong Kong) Ltd v Singapore JHC Co Pte Ltd [2023] SGCA 40 at [36].
[52] At [51]-[63].
[53]  Like England, Hong Kong does not have a standalone procedure to challenge statutory demands prior to the commencement of winding up proceedings.
[54]  See Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd [2018] HKCU 702 at [10].
[55]  At [25]. See also [26]-[31].
[56]  At [31].  Respectfully, this requirement is misconceived.  A prospective defendant does not need to commence pre-emptive arbitral proceedings if the prospective plaintiff signals that they are going to act in breach of an arbitration clause.
[57]  At [29]-[30].
[58]  But Ka Chon v Interactive Brokers LLC [2019] HKCU 2950.
[59]  At [66].
[60]  Dayang (HK) Marine Shipping Co, Ltd v Asia Master Logistics Ltd [2020] HKCU 494.
[61]  At [60].
[62]  At [65].
[63]  At [71].
[64]  AnAn Group (Singapore) Pte Ltd v VTB Bank [2020] SCGA 33 at [79].
[65]  At [134].
[66]  Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP [2023] HKCFA 9 at [105].
[67]  At [91].
[68]  Simplicity & Vogue Retailing (HK) Co Ltd [2023] HKCFI 1443 at [35].
[69]  In re Shandong Chenming Paper Holdings Ltd [2023] HKCFI 2065 at [5]-[6].
[70]  In re Shandong Chenming Paper Holdings Ltd [2023] HKCFI 2731 at [3].
[71]  See for example FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corp [2023] UKPC 33 at [29], [100] and [102].
[72]  Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383.
[73]  At [10] and [36].
[74]  At [39].
[75] Eagle-eyed readers may wonder, what then is the difference with asking, under an AnAn Group conceptualisation (relevant to the Arbitration Act), whether a party is engaging in an abuse of process?  It is true that these two tests may sometimes converge.  The difference is that when considering whether a party has engaged in an abuse of process, the Court is not typically looking at the merits of the dispute – indeed, the Court in AnAn Group strongly counselled against this approach (at [99]).   Instead, it is looking at other factors such as whether there has been a waiver of the right to arbitrate.  In contrast, a Court following Zurich (under the FAAEA) would be undertaking a quick review of the merits to determine whether a party’s position was, colloquially put, laughable.