TC v. LC

HCCT 219/2025

[2026] HKCFI 4304

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 219 OF 2025

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D E C I S I O N

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Background

1.  By order made on 16 December 2025 (“Enforcement Order”), this Court granted leave to the Applicant (“TC”) to enforce a final award dated 13 November 2025 (“Award”) made in an arbitration commenced by TC against the Respondent (“LC”) in Singapore (“Arbitration”). The Award was for LC’s payment to TC of US $1,572,455.27 and KRW 695,731,971.81 (“Principal”), interest and costs.

2.  On 12 December 2025, LC applied to the Singapore Court to appeal against the tribunal’s ruling on its jurisdiction in the Arbitration (“Jurisdiction Appeal”), claiming that:

(1)  the Arbitration had been commenced prematurely and improperly as the preconditions had not been met;

(2)  there was no valid and operative arbitration agreement binding on LC;

(3)  the tribunal had failed to correctly determine the applicable arbitral rules such that its constitution was invalid;

(4)  LC was not a principal to the underlying transaction but had at all material times acted only in the limited capacity of an agent and financier for a third party, such that LC was never a proper party to the arbitration agreement/the Arbitration.

3.  On 29 December 2025, LC separately applied to the Singapore Court to set aside the Award (“Singapore Setting Aside Application”), on the ground that:

(1)  there was no valid arbitration agreement, as there was lack of certainty as to the essential and material terms of the arbitration agreement; and that LC had never consented to arbitrate as it was acting solely as an agent;

(2)  the tribunal failed to determine the applicable arbitral rules, causing prejudice to LC in that the failure to decide on the applicable arbitral rules had impact on the composition of the tribunal, the arbitral procedure, whether LC had been given proper notice, and whether there was a breach of the rules of natural justice.

4.  On 31 December 2025, LC applied in Hong Kong to set aside the Enforcement Order (“HK Setting Aside Application”), and to adjourn these enforcement proceedings pending the final disposal of LC’s Singapore Setting Aside Application. In the affidavit of M made on 19 January 2026, LC invokes the exercise of the Court’s discretion to adjourn the proceedings in Hong Kong under section 89(5) of the Arbitration Ordinance (“Ordinance”), where an application for setting aside or suspension of the award has been made to a competent authority, namely the Singapore supervisory court in this case.

5.  On 10 April 2026 (more than 3 months after LC’s HK Setting Aside Application was made), TC applied for security to be furnished by LC, under section 89(5) of the Ordinance.

6.  At the conclusion of the hearing on 14 May 2026, this Court acceded to the application to adjourn the enforcement proceedings, pending the Singapore supervisory Court’s determination of the Singapore Setting Aside Application. The Singapore Court is obviously in the best position, as the supervisory court, to decide on matters of Singapore law which governs the underlying contracts between the parties as well as the procedure and governing rules of the Arbitration.

7.  The matter of whether and what security should be given by LC was adjourned for disposal on papers and for further evidence which has since been filed.

The applicable legal principles

8.  These are not in dispute, and both parties had referred to and relied on the principles in Soleh Boneh v Government of Uganda [1993] 2 Lloyd’s Rep 208, and Dana Shipping and Trading SA v Sino Channel Asia Ltd [2017] 1 HKC 281. The relevant considerations are as outlined by Staunton LJ in Soleh:

“In my judgment two important factors must be considered on such an application, although I do not mean to say that there may not be others. The first is the strength of the argument that the award is invalid, as perceived on a brief consideration by the Court which is asked to enforce the award while proceedings to set it aside are pending elsewhere. If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degrees of plausibility in the argument for invalidity; and the Judge must be guided by his preliminary conclusion on the point.

The second point is that the Court must consider the ease or difficulty of enforcement of the award, and whether it will be rendered more difficult, for example, by movement of assets or by improvident trading, if enforcement is delayed. If that is likely to occur, the case for security is stronger; if, on the other hand there are and always will be insufficient assets within the jurisdiction, the ease for security must necessarily be weakened.”

(Emphasis added)

9.  It was by application of these principles that this Court had adjourned the enforcement proceedings pending the Singapore Court’s determination, and granted leave for the filing of further and complete evidence as to whether security should be given for consideration of the second part of the consideration set out in Soleh. On consideration of the evidence, it cannot be said that the Award was manifestly invalid such that there should be no order for security pending an adjournment for determination by the supervisory Court of the merits of the Singapore Setting Aside Application.

10.  The issues in dispute as to the existence of a valid arbitration agreement: as to whether LC was an agent, or a principal in the underlying contract; the applicable arbitral rules and whether the tribunal had jurisdiction, are best decided by the supervisory court applying Singapore law, and the grounds relied upon by LC cannot be seen to be unarguable.

11.  The second consideration outlined in Soleh is the ease or difficulty of enforcement of the award, and “whether it will be rendered more difficult if enforcement is to be delayed”. The judgment of Staunton LJ and the subsequent cases such as NJSC Naftogaz of Ukraine v PJSC Gazprom [2019] 2 Lloyd’s Rep 20 have shown that if there are and always will be either sufficient or insufficient assets within the jurisdiction, any difficulty of enforcement will not be rendered more difficult even if the enforcement is to be delayed, as the difficulty of enforcement would not be the consequence of the delay.

12.  As this Court reasoned at paragraph 65 of the decision in A v B [2022] HKCFI 607, in a case such as the present one, the focus is on the consideration of the deterioration in the creditor’s position if an order for an adjournment should be made. If, upon comparison of the position of the creditor with and without an order for an adjournment, there is no deterioration in his position, then there is arguably no prejudice to the creditor and the need for security diminishes. Of course, each case must be considered in its own context and on its own facts.

13.  It must be borne in mind that it is not the purpose of section 89(5) to improve the general position of the creditor under the award, by giving him security for enforcement when none was available before the application to adjourn the enforcement proceedings by virtue of the setting aside proceedings made before the supervisory court. If the debtor never had assets within the jurisdiction for enforcement, it is not for the enforcement Court to order the debtor to bring in assets as security just because the debtor had made a setting aside application to the supervisory court (Karaha Bodas Co LLC v Persusahaan Pertambangan Minydak Dan Gas Bumi Negara [2003] 2 HKLRD 381).

14.  On the facts and evidence of the present case, TC complains of the fact that LC only has one asset in Hong Kong, being 3 offices with a highest value of HK $32.4 million, which is currently subject to an all-monies first legal charge in favor of DBS, the borrowings under which already amount to HK $38.6 million which exceeds the value of the property. TC highlighted that LC’s utilization of the DBS facility as at the date of the hearing of the application for adjournment stood at HK $38,940,208.28, and that (as LC accepts) it has no other liquid assets available in Hong Kong.

15.  These matters to which TC referred are not matters which were created as a result of or after the Award, the HK Setting Aside Application and the adjournment sought. According to the evidence of LC, the offices had been owned by it since 1976, and the DBS mortgage over the properties had been in place since 2011. The terms of its facility with DBS had been in place since May 2025. These were well before the making of the contract between TC and (as alleged) LC in 2023, the commencement of the Arbitration in 2024, and the Award in November 2025.

16.  LC is a company incorporated in Hong Kong. On LC’s evidence, it operates a commodity trading and trade finance business and, as not uncommon amongst small to medium-sized trading companies operating in Hong Kong, LC relies substantially on external banking facilities and trade financing to support its operational cash flow requirements. According to LC, it has been using its trade finance facilities as part of its ordinary and usual course of business since 2023, and its utilization of the DBS facility was for its business needs and trading requirements, and not for dissipating its assets nor to defeat TC’s claim in the Arbitration.

17.  I agree that there is no evidence of LC’s dissipation or attempts at dissipation of its assets since either the Arbitration or the date of the Award. Nor is the available evidence sufficient to show that there was improvident trading on the part of LC just because of its continued utilization of its finance facilities.

18.  TC relies on the fact that the Award is a substantial amount, and as held in 中國機床銷售與技術服務有限公司v 國晟機電設備有限公司 [2004] 4 HKC 227, this is a relevant consideration to show difficulty in enforcement. In that case, the court had observed that:

“ … where there is a very large award, delay without security is inherently likely to prejudice the award creditor and certainly risks doing so. We regard that as a factor which would incline us towards providing some security”.

19.  On behalf of LC, it was emphasized that there has been no delay on its part, in making its Jurisdiction Challenge, the Singapore Setting Aside Application and the HK Setting Aside Application. The only delay so far was in the process of service of the relevant proceedings on TC in Korea, as the process takes time and involves translation of voluminous documents. On the other hand, LC pointed to the delay of over 3 months on TC’s part in seeking security, after it had been served with the HK Setting Aside Application in December 2025, and LC contended that there could not have been any prejudicial delay when TC had itself not deemed it necessary to protect its position. As this Court held in G v N [2023] HKCFI 2437, where there is delay on the applicant’s part in seeking security, and this leads to only a short interim between the hearing of the application for security and the substantive hearing of the setting aside application, little purpose could be served by ordering security. Most if not all the costs would have been incurred.

20.  Due to the delay in service outside Singapore, which was still incomplete at the time of the hearing in May 2026, it was uncertain when the Singapore proceedings would be heard and when a decision would be available in the Jurisdiction Appeal and the Singapore Setting Aside Application. This is a matter to be taken into consideration when this Court decides on whether security should be ordered to the extent of the prejudice to TC.

21.  In the absence of any evidence filed as to the means of the shareholders/beneficial owners of LC, it cannot establish its case that its opposition to the Singapore and HK Setting Aside Applications would be stifled, if substantial security should be ordered against LC.

22.  What is pertinent is that LC has offered to provide security to TC in the form of a payment into court of, or by provision of a bank guarantee for US $400,000, and to make payment of US $50,000 each calendar month (details set out at paragraph 27 of the affirmation of K filed for LC). This, LC explains, represents a balance between providing security to TC for the period of the adjournment and stay sought by LC, and enabling LC to continue its normal business operations. By its solicitors’ letter of 10 February 2026 (“10/2/26 Letter”), LC had also undertaken not to dispose of the 3 offices in Hong Kong pending the determination of the HK Setting Aside Application.

23.  Having considered all the circumstances of this case, and in particular since I am not persuaded that LC’s financial difficulties and the other difficulties in enforcement to which TC referred were the result of the further delay occasioned by the adjournment, I conclude that LC’s offer is made in good faith, reasonable, and adequate for the time being for security. An order in terms of those for the provision of security, set out in K’s affirmation filed on 22 June 2026, is made, on the basis of and against the undertaking offered by LC in the 10/2/26 Letter.

Disposition

24.  For the reasons set out above, I decline to order further security. Since the security application is not successful, the order nisi is that the costs of the security summons are to be borne by TC, with certificate for counsel, to be taxed if not agreed.

25.  If security is not provided by LC within 28 days of the handing down of this Decision, the HK Setting Aside Application be dismissed with costs to TC on indemnity basis.

26.  The costs of the HK Setting Aside Application and of the adjournment (including the costs of the hearing on 14 May 2026 and any other costs reserved) are in the cause.