HYALROUTE COMMUNICATION GROUP LTD v. INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LTD

CACV 600/2025, [2025] HKCA 936

On Appeal From [2025] HKCFI 2417

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 600 OF 2025

(ON APPEAL FROM HCCT NO. 155 OF 2024)

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DECISION

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Hon Anthony Chan JA (giving the Decision of the Court) :

1.  This is the renewed application of the Plaintiff for an interim anti-suit injunction (“ASI”) against the Defendant pending determination of its appeal, pursuant to a Summons filed on 26 August 2025 (“Summons”).

Background

2.  For the present purpose, the background facts can be succinctly stated.  The Plaintiff is a company incorporated in the Cayman Islands.  The Defendant is a bank.  Two of the Plaintiff’s subsidiaries borrowed a term loan from the Defendant, with the Plaintiff acting as guarantor.  The borrowers and the Plaintiff failed to repay the loan.

3.  The Term Facility Agreement (“TFA”) contained an arbitration agreement (clause 43.1) as follows :

“(a) Any dispute, controversy or claim arising in any way out of or in connection with this Agreement (including (i) any issue regarding contractual, pre-contractual or non-contractual rights, obligations or liabilities and (ii) any issue as to the existence, validity, breach or termination of this Agreement) (a ‘Dispute’) shall be referred to and finally resolved by binding arbitration administered by the Hong Kong International Arbitration Centre (‘HKIAC’) in accordance with the HKIAC Administered Arbitration Rules in force as at the date of this Agreement (the ‘Rules’), which Rules are deemed to be incorporated by reference into this Clause 43.1 and as may be amended by the rest of this Clause 43.1 (“Arbitration Agreement”).

…

(c) The seat of the arbitration shall be Hong Kong.  This arbitration agreement shall be governed by the laws of Hong Kong.”

4.  On 22 November 2024, the Defendant served a statutory demand on the Plaintiff in the Cayman Islands pursuant to s.93 of the Cayman Islands Companies Act.  On 16 December 2024, the Plaintiff issued an Originating Summons (“OS”) in Hong Kong seeking an ASI injunction to restrain the Defendant from commencing any legal proceedings (including winding-up proceedings) in connection with the TFA in any court other than the Hong  Kong International Arbitration Centre (“HKIAC”).

5.  The OS was heard before Recorder William Wong SC.  By a Decision dated 1  August 2025, the Recorder dismissed the OS with costs to the Defendant (“Decision”). 

6.  In essence, it was held that the Arbitration Agreement had not been breached.  This was based on the Recorder’s construction of that Agreement to the effect that only the “final” resolution of disputes would be caught by the Agreement (“Construction Issue”). Further, the Recorder considered that the underlying merits of the Plaintiff’s case to be frivolous and therefore refused in any event to grant the ASI (“Merits Issue”).

7.  The Plaintiff filed a Notice of Appeal against the Decision on 12 August 2025 (“NOA”).  On 18 August 2025, the Recorder dismissed the Plaintiff’s application to extend the Defendant’s undertaking not to present a winding-up petition in the Cayman Islands until after the determination of the OS and/or for an interim ASI pending the Appeal. However, upon the Plaintiff’s undertaking to pursue the Appeal on urgent basis, the Recorder granted a case management stay so that the Plaintiff can make a renewed application to this Court.  Subsequently, the stay granted by the Recorder was extended by Chu VP until determination of the Summons or further order.

The Decision

8.  It was said that the OS involved a novel point of law which concerned the interaction between Re Guy Kwok-Hung Lam (2023) 26 HKCFAR 119 and Sian Participation Corp v Halimedia International Ltd [2024] UKPC 16, a decision of the Privy Council on appeal from Cayman Islands.  Pursuant to the former, and the subsequent case of this Court in Re Simplicity & Vogue Retailing (HK) Co Ltd [2024] 2 HKLRD 1064, winding-up proceedings will be stayed in favour of arbitration unless there is strong reason not to do so, including the lack of a bona fide defence to the debt which may constitute an abuse of process.  Under the latter (and English law), the debtor is required to show the usual bona fide defence on substantial ground to justify an ASI.

9.  The Recorder considered, firstly, that whether foreign winding-up proceedings were in breach of an arbitration clause was a matter of proper construction of the terms of the clause[1], notwithstanding that there was no dispute that the Arbitration Agreement was valid and covered the dispute as to the Plaintiff’s indebtedness under the TFA, which would likely be raised in the winding-up proceedings in the Cayman Islands (“Cayman Proceedings”)[2]. 

10.  The Recorder referred to the term “finally resolved” in the Arbitration Agreement, and held that it imposed a positive duty on the parties to have disputes within the scope of the Agreement finally resolved by arbitration, as well as a negative obligation not to have disputes finally resolved in a non-contractual forum[3].  He went on to hold that if the proceedings did not have the effect of finally resolving the disputes, then the negative obligation was not infringed and there would be no breach of the Arbitration Agreement[4].  Thus, the real issue was whether the Cayman Proceedings would have the effect of finally resolving the dispute over the Plaintiff’s indebtedness under the TFA[5].

11.  The Recorder recognised that under Hong Kong law, which applied to the Arbitration Agreement, winding-up proceedings would determine the Plaintiff’s indebtedness under the TFA[6].  However, the Recorder agreed with the Defendant that in resolving the question whether Cayman Proceedings would have the effect of finally resolving the disputes between the parties or give rise to res judicata, he should consider Cayman Islands law[7].

12.  Despite the lack of evidence on Cayman Islands law, based on the authorities from that jurisdiction, the Recorder concluded that :

“(1) The Court cannot give more conclusive force than what Cayman law would give in the Cayman winding-up proceedings to the treatment of the dispute about [the Plaintiff’s] indebtedness under the TFA.

(2) The Cayman proceedings would not have the effect of finally resolving the dispute within the meaning of [the Arbitration Agreement].

(3) Hence, the Defendant in bringing the Cayman proceedings would not be in breach of its obligation under [the Arbitration Agreement] to not have the dispute finally resolved in a non-contractual forum.”[8]

13.  The Recorder took the view that on the Construction Issue alone, the OS should be dismissed[9].

14.  The Recorder went on the consider the Merits Issue despite the Plaintiff’s case that merits would be wholly irrelevant in respect of ASI, and concluded that the underlying merits of the Plaintiff’s defence was hopeless, frivolous and it was an abuse for it to rely on such defence to prevent the Defendant from invoking the Cayman Court’s winding-up jurisdiction[10].

Applicable legal principles

15.  The principles governing the grant of interim injunction pending appeal where the applicant had lost at first instance were identified in Registrar of Hong Kong Institute of Certified Public Accountants v X [2017] 3 HKLRD 541 at [43] per Kwan JA (as she then was) :

(1)  The court must be satisfied that the appeal has a real prospect of success.

(2)  If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience.

(3)  It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted.  The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted.

(4)  The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory.  Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other.

(5)  As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard.

Grounds of appeal

16.  Helpfully, Mr Maurellet SC, who represented the Plaintiff with Ms Catrina Lam SC and Mr Han, had identified the grounds of appeal as follows :

(1)  The Construction Issues: misinterpretation of the Arbitration Agreement.

(2)  Improper reliance on Cayman Islands law.

(3)  Misapplication of Cayman Islands law.

(4)  Underlying merits irrelevant for ASI / Hong Kong Court’s insolvency jurisdiction not engaged.

(5)  Erroneous finding of hopeless and frivolous defence.

Discussion

17.  In respect of the Construction Issue, Mr Maurellet submitted that, properly construed, the words “finally resolved” simply mean that the outcome of the arbitration is intended to produce a conclusive resolution of the dispute.  The Recorder’s narrow interpretation – only disputes that would be finally resolved in a non-contractual forum would fall foul of the Arbitration Agreement – unjustifiably limits the scope of the Agreement and undermines the parties’ express agreement.

18.  We are of the view that this ground is reasonably arguable. 

19.  As regards the reliance on Cayman Islands law (Ground (2)), the Plaintiff’s position is that this issue rises and falls with the Construction Issue.  If this Court agrees with the Plaintiff (for the present purpose) on the Construction Issue, ie, a breach of the Arbitration Agreement is not dependent on the finality of the foreign proceedings, this issue does not arise for consideration.  No more needs to be said about this Ground.

20.  The same may be said about Ground (3), which is also concerned with Cayman Islands law.

21.  In respect of Ground (4), firstly, in light of Guy Lam and Simplicity, the law of Hong Kong, in simple terms, is that an ASI would normally be granted in respect of winding-up proceedings brought in breach of an arbitration agreement in the absence of strong reasons.  The lack of any bona fide dispute to the petitioning debt may constitute an abuse of process as well as strong reason not to grant an ASI.  It is a matter of discretion of the court. 

22.  We do not believe that it is reasonably arguable that merits of the Plaintiff’s defence are irrelevant to its application for ASI or should not be considered at all. 

23.  Secondly, the Plaintiff’s argument that the above principle does not apply because no winding-up proceedings have been instituted is not one we find reasonably arguable either.  First, the ASI sought by the Plaintiff was a quia timet injunction to prevent the Defendant from bringing winding-up proceedings as a consequence of an unmet statutory demand.  The Plaintiff’s evidence clearly referred to and relied upon the prospects of such proceedings[11].

24.  Second, it is unrealistic to suggest that the Plaintiff’s ASI application should be considered without reference to the threatened proceedings or the principles which govern the grant of ASI in respect of such proceedings.  Put another way, the court does not consider its exercise of discretion to grant an ASI in a vacuum.  The proceedings which were brought or threatened a breach of arbitration agreement and the prospects and merits of the proceedings must be considered.  

25.  Finally, in respect of the merits of the Plaintiff’s defence to the debt owed to the Defendant (Ground (5)), the Plaintiff has advanced no submission save for relying on paras 26 to 28 of the NOA. 

26.  We do not believe that those paragraphs in the NOA are sufficient to demonstrate that the Recorder was wrong in his findings. In particular, we are not satisfied that the estoppal argument over the termination of the MIGA Insurance Contract, which formed an important basis on which the Recorder concluded that the Plaintiff’s defence was hopeless and frivolous, is reasonably arguable. 

27.  The Plaintiff was clearly alive to the fact that the payment obligation over the insurance premium rested with it[12].  The contemporaneous document suggested that the Plaintiff sought to have the premium reduced or waived[13].  There was no evidence that the payment of premium was reduced or waived.  In the absence of payment of premium[14], the insurance would naturally lapse.  It is therefore difficult to see how it can be said that the Plaintiff had relied upon any purported representation of the Defendant regarding the termination of insurance which might give rise to an estoppel.  The termination of the MIGA insurance undermines the defence of the Plaintiff fundamentally. 

28.  The upshot is that even if the Recorder had erred on the Construction Issue, unless there is a reasonably arguable appeal on the merits of the Plaintiff’s defence, the error would not assist the Plaintiff in this application. 

29.  Given our view that there is no arguably appeal in respect of the merits of the Plaintiff’s defence, this application fails at the first hurdle.  It is unnecessary to consider the matter further.

Disposition

30.  By reason of the aforesaid, the Summons is dismissed with costs to the Defendant, to be summarily assessed.  The Defendant is to lodge and serve a statement of costs within 5 days from the date of this Decision.  The Plaintiff is to lodge and serve its comments thereon within 3 days thereafter, limited to 3 pages.  The Defendant is to lodge and serve its reply within 3 days thereafter, limited to 2 pages.  The assessment will be dealt with on paper.

[1]  Decision, [52]

[2]  Decision, [67]

[3]  Decision, [70]

[4]  Decision, [71]

[5]  Decision, [72]

[6]  Decision, [74]

[7]  Decision, [85]-[101]

[8]  Decision, [126]

[9]  Decision, [127]

[10]  Decision, [134], [136]-[141]

[11]  See the affirmation of Dong He dated 20 December 2024, [10(3) & (4)] and [60] at A/11/108, 109 and 123

[12]  See affirmation of Dong He dated 20 December 2024, [26] at A/11/112

[13]  See B1/20 

[14]  The Recorder found that the Plaintiff had failed to pay the premium on time:  Decision, [140 (3)]