Re Simplicity & Vogue Retailing (HK) Co., Limited [2024] HKCA 299 (Hong Kong)

At issue is the approach that should be adopted by the court in winding up proceedings where there is an agreement between the parties to refer their dispute relating to the petition debt to arbitration. It is contended by the Company that the approach regarding exclusive jurisdiction clauses (“EJC”) in bankruptcy proceedings laid down by the Court of Final Appeal in Re Guy Kwok Hung Lam [2023] HKCFA 9 (“Guy Lam CFA”) should be applied by analogy to this situation.

The court looked into the so-called "Established Approach", that is, absent the EJC or an arbitration provision, a petitioner will ordinarily be entitled to a bankruptcy order (or in the case of corporate insolvency, a winding-up order) if the petition debt is not subject to a bona fide dispute on substantial grounds. According to the court, the "Established Approach" would not be appropriate where the petition debt is covered by an arbitration clause. Following the approach in Guy Lam CFA, the threshold character of a dispute about indebtedness leaves room for the exercise of discretion by the court to decline to exercise the jurisdiction to determine that question, leaving the dispute to be resolved by arbitration as agreed and with regard to the public policy in holding the parties to their agreement.