In our previous alert relating to 广东顺德展炜商贸有限公司 v. Sun Fung Timber Company Limited  HKCFI 2407, we examined a decision of the Hong Kong court to dismiss the application for security by an award creditor seeking to enforce a mainland award issued by the Zhanjiang Arbitration Commission in Hong Kong. The said decision followed an earlier decision of the Hong Kong court to dismiss a winding up petition lodged by the same award creditor in respect of the award debt. The award creditor appealed against the judge’s decision to dismiss the winding up petition.
Grounds of appeal and dismissal of the appeal
The award creditor advanced a number of grounds of appeal. In dismissing the appeal, the CA took the chance to clarify a number of important legal principles pertaining to a winding up petition based on an award debt.
First, the award creditor argued that the proper test in determining a winding up petition based on an award debt should be whether there was a “real prospect of success” in setting aside the arbitral award. The CA disagreed and held that the proper test should be whether there was bona fide dispute on substantial grounds in respect of the award debt. In particular, the CA was not persuaded that the threshold test for determining a winding up petition based on an award debt should necessarily be the same as the test for setting aside an arbitral award.