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Insolvency, International / offshoreMonday 15 May 2023

City Gardens v Dok 82: High Court confirms that a winding up petition may be brought notwithstanding a foreign exclusive jurisdiction clause

City Gardens Limited brought a creditor’s winding up petition against Dok 82 Limited (the Company), in relation to sums that City Gardens said were due to it by the Company under a contract governed by Hong Kong law and subject to the exclusive jurisdiction of the Hong Kong court.

At first instance, the petition was dismissed. The Court determined that the exclusive jurisdiction clause meant that the winding up petition could not be pursued, as the question of whether or not City Gardens was owed the sums in question was a matter for the Hong Kong court. The Court also rejected the petition for the further reason that there was an absence of evidence as to Hong Kong law, so that the position under the contract might be different pursuant to Hong Kong law.

In a judgment handed down on 15 May 2023, the High Court allowed City Gardens’ appeal.

Of most interest is the Court’s finding that there is binding Court of Appeal authority that, where an alleged debt is based upon a contract which contains an exclusive jurisdiction clause in favour of a foreign court, the judgment as to the exercise of the winding up power remains that of the domestic court. In other words, an exclusive jurisdiction clause does not preclude a petition proceeding on the basis of a debt arising under the contract that contains the exclusive jurisdiction clause. The only question is whether the alleged debt is disputed in good faith on substantial grounds.

The Court also held that the Judge was wrong to find that the Hong Kong law clause was a reason to dismiss the petition. The Company had failed to put forward any basis on which Hong Kong law was in fact different or adduce any evidence in this regard. The burden was on the Company, which it did not discharge. In any regard, the presumption of similarity applied such that the position was presumed to be the same as under English law.

The Court then went on to consider the facts. It determined that there was no good faith dispute on substantial grounds. It therefore allowed the appeal and made an order for the winding up of the Company.

Bobby Friedman acted for the successful appellant on the appeal (different counsel being instructed at the first instance hearing).

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