RE GUY KWOK HUNG LAM

CACV 393/2021

[2022] HKCA 1683

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 393 OF 2021

(ON APPEAL FROM HCB NO 4115 OF 2020)

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J U D G M E N T

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G Lam JA (giving the Judgment of the Court):

1.  In our judgment dated 30 August 2022 (“Judgment”),[1] we unanimously allowed the appeal, set aside the bankruptcy order made by the Judge below, and dismissed Tor’s petition. There was however a difference in the reasoning. In the judgment of G Lam JA, with which Barma JA agreed, it was held that the Exclusive Jurisdiction Clause between the parties was engaged by Tor’s petition since the debt was disputed by Lam, that the petition should not be allowed to proceed in the absence of strong reasons, and that as Tor had not shown any such strong reasons the petition should be dismissed. Chow JA agreed that the Exclusive Jurisdiction Clause was engaged, and that this was relevant to the exercise of the court’s discretion whether to dismiss or stay the petition, but did not agree with the approach that the petition should therefore be dismissed or stayed unless strong reasons are shown to the contrary. Nevertheless, in the circumstances of this case, he considered that the discretion should be exercised for dismissal of the petition.

2.  Tor now seeks leave from this court to appeal to the Court of Final Appeal. The ground of the application is that there are questions of great general and public importance, which are reasonably arguable, raised in the proposed appeal. The questions advanced in Tor’s Notice of Motion are as follows:

“ 1. If a creditor petitions for the bankruptcy or winding up of a debtor for non-payment of a debt, does this constitute a breach of an EJC which provides for ‘proceedings’ arising out of a contract between the parties to be brought in a foreign jurisdiction, and if yes, should the creditor be debarred from so petitioning until a judgment has been obtained in the chosen jurisdiction?

2. Is it contrary to public policy for the Court to fetter the jurisdiction to bankrupt or wind up a debtor by reason of an EJC, which simply provides for the debtor and the creditor to submit to the exclusive jurisdiction of a foreign court for all proceedings arising out of a contract between the parties?

3. If the contract between a creditor and a debtor contains an EJC providing for proceedings between the parties to be brought in a foreign jurisdiction:

(a) Must the creditor ordinarily obtain judgment in the foreign jurisdiction before petitioning for the bankruptcy or winding up of the debtor in Hong Kong, unless strong reasons are shown?

(b) If yes, are strong reasons shown if the debtor has not demonstrated to the Hong Kong court a bona fide dispute on substantial grounds to the debt relied upon by the creditor in the bankruptcy or winding up petition?”

3.  Lam takes a neutral position overall in relation to the application for leave, but his counsel have made submissions on the formulation of the questions that should be put forward.

4.  We are satisfied that leave should be given for Tor to appeal to the Court of Final Appeal in this case. The question of what the proper approach should be to an insolvency petition in the light of an exclusive jurisdiction clause has not been decided or even discussed in previous cases in Hong Kong. As set out in this court’s Judgment at §§95 – 104, there is no established body of common law authorities either. There is a divergence of judicial opinion both in Hong Kong and among different jurisdictions in the related area of the proper approach to an insolvency petition in the light of an arbitration clause: see Judgment §§43 – 60. There is a question of law of sufficient general importance to be submitted to the Court of Final Appeal.

5.  We do not, however, find the questions put forward by Tor to be satisfactory. In particular, there is substantial overlap between Questions 1 and 3, and although Question 2 relates to an argument which Tor may wish to raise in the appeal, it does not seem to us it should constitute an independent question in itself. In broad terms, the question that is essentially raised seems to us to be: in the light of the Exclusive Jurisdiction Clause, what should be the court’s approach to the petition and, in particular, whether the approach laid down by this Court’s majority in reasoning is correct. Whilst this may involve the construction of the clause in this case and as such be based on its wording, the decision of the Court of Final Appeal is in our view nevertheless likely to be of guidance to future cases having regard to the common nature of exclusive jurisdiction clauses generally.

6.  We would accordingly formulate the question as follows:

Where:

(1)  parties to an agreement have agreed to submit to the exclusive jurisdiction of a specified foreign court for the purposes of all legal proceedings arising out of or relating to their agreement or the transactions contemplated thereby,

(2)  one of the parties has petitioned in Hong Kong for the bankruptcy of another party on the basis of a debt arising under the agreement, and

(3)  the debt is disputed by the latter party,

what is the proper approach of the Hong Kong court to the petition? In particular, should the petition ordinarily be stayed or dismissed pending the determination of the dispute in the foreign court unless there are strong reasons to the contrary (on the footing that the petitioner may not seek to demonstrate such strong reasons by showing that there is no bona fide dispute of the debt on substantial grounds)?

7.  There will be an order granting leave accordingly. Costs of the application shall be in the cause of the appeal to the Court of Final Appeal.