CL v. C

HCCT 47/2026

[2026] HKCFI 5072

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 47 OF 2026

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D E C I S I O N

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Background

1.  On 10 February 2026, the Applicant (“CL”) applied for leave to enforce an arbitral award dated 16 December 2025 (“Award”) made in an arbitration seated in Singapore. On 11 February 2026, this Court granted the leave sought by an order made on that day (“Enforcement Order”).

2.  Under the Award, the Respondent (“C”) is to pay to CL US$2,100,000, interest and costs.

3.  Under the Enforcement Order, liberty was granted to C to apply to set aside the Enforcement Order within 14 days of service upon it and, by paragraph 2 of the Enforcement Order, the Award was not to be enforced until after the expiry of that period or, if C applies within the period to set aside the Enforcement Order, until after such setting aside application is finally disposed of.

4.  On 13 March 2026, C applied to the Singapore supervisory court to set aside the Award (“Singapore Setting Aside Application”), on grounds alleging fraud and that material facts had not been disclosed by CL in the arbitration (in which C had not taken part).

5.  Following that, on 18 March 2026 (which was after the period of 14 days specified in the Enforcement Order), C applied in Hong Kong to set aside the Enforcement Order (“HK Setting Aside Application”), for leave to make such application out of time (“Time Extension Application”), and for the Enforcement Order, the HK Setting Aside Application and the enforcement proceedings in Hong Kong to be stayed (“Stay Application”), pending determination of C’s Singapore Setting Aside Application, citing section 86(4) of the Arbitration Ordinance (“Ordinance”).

6.  The above applications made by C prompted an application by CL on 29 June 2026, for security to be provided by C, and for the Time Extension Application to be dismissed in default of security being provided (“Security Application”). The Security Application relies on Order 73 rule 10A RHC, Order 23 rule 1 RHC, and section 89(5) of the Ordinance (which applies to Convention Awards).

7.  On 23 July 2026, this Court made an order for evidence to be filed, and for the Security Application and the HK Setting Aside Application to be heard together.

8.  At the hearing on 19 August 2026, Counsel for C contended that C no longer pursues the Stay Application, and highlighted the fact that there has been no automatic stay of the Enforcement Order under paragraph 2 of the said order, since there was no application made by C within the period of 14 days specified to set aside the Enforcement Order. Hence, Counsel for C pointed out that CL had all along been entitled and remains entitled to enforce the Award against C in Hong Kong pursuant to the Enforcement Order. On that basis, it was contended that the Court does not even have jurisdiction or power to order security under section 89(5) of the Ordinance which gives effect to Article VI of the New York Convention, when there is no stay of enforcement of the Award and no adjournment of the enforcement. The distinction made for C is that it now only seeks a “case-management adjournment” of its applications to the Court in Hong Kong, pending the determination of the Singapore Setting Aside Application. That application will be heard in Singapore in September 2026, and a decision is expected shortly thereafter.

Jurisdiction

9.  I do not accept the submissions made by Counsel for C, that this Court has no jurisdiction and power to order security when there is no stay of enforcement sought, and that the “adjournment” of proceedings referred to in sections 86(4) and 89(5) of the Ordinance can only mean an adjournment when there is a stay of the enforcement proceedings sought, rather than a simple adjournment of a hearing. Counsel seeks reliance on IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2017] 1 WLR 970, at 981H, which applied section 103(5) of the English Arbitration Act 1996, and it was highlighted for C that that the adjournment sought in the case was “to avoid immediate and final enforcement”, pending determination of a challenge before the supervisory court.

10.  Section 103(5) of the 1996 Act corresponds in substance to section 89(5) of the Ordinance.

11.  Section 89(5) of the Ordinance states as follows:

“If an application for the setting aside or suspension of a Convention award has been made to a competent authority as mentioned in subsection (2)(f), the court before which enforcement of the award is sought-

(a) may, if it thinks fit, adjourn the proceedings for the enforcement of the award; and

(b) may, on the application of the party seeking to enforce the award, order the person against whom the enforcement is invoked to give security.”

The only difference in the language used is that section 103(5) refers to the court adjourning the decision on the recognition or enforcement of the award, whereas section 89(5) refers to the court adjourning the proceedings for the enforcement of the award.

12.  On my reading of the judgment in IPCO, the distinction made by the court was whether the adjournment (or stay of enforcement as emphasized by Counsel for C) was pending the determination of the challenge to the award made to the supervisory court. If the adjournment/stay was not for such purpose, then the power to order security under section 103(5) does not arise. The Supreme Court held that because the Court of Appeal had concluded that the issue of whether fraud was an answer to enforcement should not await the outcome of the proceedings before the Nigerian court, but should be decided by the English enforcement court, there was no “adjournment” for the purposes or within the meaning of section 103(5), and it was not within the scope of any jurisdiction or power conferred by the section on the court to provide security.

13.  The distinction sought to be made for C in this case makes no real or valid difference as to whether the Court has jurisdiction to order security. It is true that there was no “automatic stay” of the Enforcement Order by operation of paragraph 2 of the Enforcement Order (C having failed to apply for setting aside within 14 days). However, C conceded at the hearing on 19 August 2026 that it still pursues the Time Extension Application and the HK Setting Aside Application, but only seeks the hearing of those applications to be adjourned, as a matter of case management, pending the determination of the Singapore Setting Aside Application. In other words, C still seeks to oppose the enforcement of the Award and to apply, out of time, to set aside the Enforcement Order. The enforcement proceedings commenced by CL are still live, ongoing and challenged. The Court is simply being asked to postpone its decision on whether to set aside the Enforcement Order - pending the determination of the Singapore Setting Aside Application. I fail to see how it can be said that the provision for security in section 89(5) has not been triggered, when there are enforcement proceedings before the Court which are within the control and management of the Court, simply because the decision whether to allow C to set aside the Enforcement Order out of time is postponed by the adjournment sought.

14.  In any event, there is further express provision under Order 73 rule 10A RHC, for the Court to impose terms as a condition of the further conduct of enforcement proceedings in which the debtor has applied under rule 10(6) to set aside an Enforcement Order. Rule 10A is in wide terms:

“Where a debtor has applied under rule 10 (6) to set aside an order made under rule 10 (4) [granting leave to enforce an arbitral award], the Court may, either of its own motion or on an application made by the creditor, and if, having regard to all the circumstances of the case it thinks it just to do so, impose such terms, as to giving security or otherwise, as a condition of the further conduct of the application, as it thinks fit.”

There has been an application made by C on 18 March 2026, to set aside the Enforcement Order out of time, for rule 10A to apply.

15.  Hence, I am satisfied that the Court has jurisdiction and power to order security to be furnished by C, on its application to adjourn the HK Setting Aside Application by way of challenge to the Enforcement Order, pending the determination of the Singapore Setting Aside Application. This is notwithstanding that enforcement has not been stayed in the interim, and notwithstanding that C no longer seeks an interim stay of enforcement. However, the fact that there is no interim stay is a matter which the Court may take into consideration, in deciding whether it is just or fit to impose terms.

Whether security should be ordered

16.  It was contended by Counsel for CL that security is sought as the price of the adjournment which C seeks from the Court. I agree that it is C which is seeking the indulgence from the Court. It asks for the HK Setting Aside Application to be adjourned and for this Court’s determination, on whether to grant it time to apply for the setting aside of the Enforcement Order, to be postponed and not to be decided on investigation of the merits of the setting aside application and the time extension sought (which will involve consideration of the reasons for the delay and whether it has grounds to oppose enforcement of the Award in Hong Kong). On CL’s case, the just price to be paid by C would be to provide security for part of the amount allowed under the Award, and for the costs incurred and to be incurred in opposing the HK Setting Aside Application.

17.  The usual approach to an application for security is to apply the principles set out in Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208, where the Court observed:

“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 (sufficient) assets within the jurisdiction, the ease for security must necessarily be weakened.”

(Emphasis added)

18.  In this case, Counsel for both parties agree that there is no evidence on the merits of the Singapore Setting Aside Application (on which the opposition to enforcement of the Award in Hong Kong is based), to show either that the Award is manifestly valid, or manifestly invalid. CL only referred to the judgment of Sir Nigel Teare IJ, issued in the application for security made in the Singapore Setting Aside Application, that:

“(CL) has raised substantial and formidable arguments, supported by authority, as to why (C’s) case will not succeed…. What can be said is that it is apparent from (CL’s) written submissions that CL has a reasonable or plausible prospect of successfully resisting the challenge to the Award, and so obtaining an order for costs. (C) has not engaged with (CL’s) arguments and so cannot show a high probability that it will succeed or that CL will fail.”

19.  Counsel for C accepts that there is insufficient material for C to submit that the Singapore Setting Aside Application enjoys such a high probability of success that an order for costs or for security should be refused on the basis of the underlying merits alone.

20.  It was submitted for C that the balance being even, security should not be ordered.

21.  On CL’s part, Counsel made various forthright concessions. It was accepted that: (1) there is no claim against C of dissipation of assets or risk of such dissipation; (2) no presently available and unencumbered asset of C has been located or identified in Hong Kong; (3) the charge in favor of the bank in respect of C’s cash deposit in Hong Kong was created in November 2015, before the Award of December 2025 and the Enforcement Order of February 2026; (4) C has complied with the order of the Singapore Court for the provision of security for costs, of S$100,000; (5) there has been delay in CL’s application for security, of around 3 months from the issue of the HK Setting Aside Application in March 2026 to the making of the Security Application in June 2026, and the Singapore Setting Aside Application will be heard shortly in September 2026.

22.  As explained in A v B [2022] HKCFI 607, in considering whether security should be ordered as a condition for an adjournment of the enforcement proceedings pending the determination by the supervisory court, the Court is to compare the position of the creditor under the award, if it was allowed to enforce the award immediately, and its position if enforcement was to be delayed as a result of the adjournment of the enforcement proceedings. The focus is to consider the ease or difficulty of the enforcement of the award, and whether enforcement will be rendered more difficult as a result of the delay, which can demonstrate whether the creditor is prejudiced as a result of the adjournment.

23.  On the facts of this case, I have to accept that there is little difference made to the position of CL as creditor, whether the enforcement proceedings are adjourned and delayed, or not.

24.  As frankly admitted by CL, there is no evidence of dissipation or risk of dissipation of C’s assets. The encumbrance created over its cash assets as identified existed at the time when the Award, and the Enforcement Order, were made, and the charge has effect whether or not the enforcement proceedings are adjourned. There are no other assets of C which have been identified in Hong Kong. Significantly, as highlighted by Counsel for C, CL is able to continue its enforcement efforts in Hong Kong, in the absence of any stay ordered by the Court. It cannot be said that enforcement has been or will be rendered more difficult as a result of the adjournment, or that CL has been or will be prejudiced.

25.  Counsel for CL highlighted the fact that C has not made any disclosure of its assets in Hong Kong, nor of its financial situation, and that this was notwithstanding the claim or suggestion made to the Singapore Court that it has substantial or sufficient assets in Hong Kong for CL to look to by way of enforcement. In proceedings for setting aside either an award or an order for its enforcement, the debtor is not under any duty to volunteer information as to its assets or its finances, although it may of course do so, if it assists its case in resisting security. The courts have pointed out in the authorities (Karaha Bodas Co LLC v Persusahaan Perstambangan Minydak Dan Gas Bumi Negara [2003] 2 HKLRD 381) that the primary aim is not to improve the creditor’s position, but merely to preserve its position in the interim of the adjournment of and delay in the enforcement proceedings, and not to create prejudice to the creditor as a result.

26.  As Counsel for C highlighted, although CL relies on Order 23 rule 1 RHC for its Security Application, the rule has no application in this case, as C is a company incorporated in and carried/carries on business in Hong Kong. There is no suggestion that Order 23 rule 1(1)(b), (c) or (d) applies to C.

27.  Counsel for CL submitted that if C does not have any assets, or is shown to have liquidity problems, and there is doubt as to whether C was still operating a business, then its financial position gives rise to concern as to whether C would be in the position to pay either the Award, or CL’s costs in these enforcement proceedings, and it should be ordered to furnish security, at least for costs incurred and to be incurred in the interim. In this regard, the suspension of C’s licences in Hong Kong, to which CL referred, had (even according to CL’s search) been in effect since 2015 and 2018.

28.  Since the relevant exercise is the comparison of CL’s position with, and without, an adjournment, I cannot agree that CL has demonstrated that it will be prejudiced by the adjournment of these proceedings pending the outcome of the Singapore Setting Aside Application. Of course, the fact that there is a substantial award is a consideration, but it is also significant that there has been no stay of the Enforcement Order in the interim. If assets of C can be identified in the interim, whether upon examination of its director in the forthcoming hearing, or otherwise, CL is entitled and able to enforce the Award against such assets. If CL had actually been in financial difficulties at the time of the Award and the Enforcement Order, and if there had always been insufficient assets in Hong Kong for CL to seek recovery, then CL cannot ask for its own position to be improved now, by seeking security.

29.  Considering the matter in the round, I will only order that C must pay to CL the costs of the Time Extension Application, including the costs of the hearing, which are incurred as a result of C’s request for the Court’s indulgence of granting the adjournment it seeks. The costs to be paid by C include the costs incurred in the HK Setting Aside Application wasted or thrown away by the adjournment application, and the costs to be incurred when the hearing of the HK Setting Aside Application is restored. These additional costs will not have to be incurred but for the adjournment.

30.  The above orders are made as part of the consideration of the Security Application, and in light of the last minute withdrawal of the Stay Application, and no separate order for costs of the Security Application will be made.

31.  The above costs are to be taxed, if not agreed, with certificate for Counsel.