In the recent decisions of Re Guy Lam, the Court of Appeal ([2022] 4 HKLRD 793) and the Court of Final Appeal ([2023] HKCFA 9) clarified that the Court will generally stay a bankruptcy/winding up petition if the petition debt was arbitrable, without considering whether the debtor had raised a bona fide dispute as to the petition debt on the merits.

In Re Shandong Chenming Paper Holdings Ltd [2023] HKCFI 2065, Harris J examined whether the same approach would apply when the debtor raises an arbitrable cross-claim that exceeds the petitioning debt, such that the debtor would not have to show that the cross-claim was arguable in seeking to dismiss/stay the petition.

Harris J held that the Guy Lam approach did apply to arbitrable cross-claims. His Lordship considered that there was no distinction between a claim and a cross-claim when considering whether there is a defence to the winding up petition; and if there was that distinction would not have escaped the higher courts in Guy Lam, which treated claims and cross-claims alike.

Harris J also took the opportunity to explain that the Guy Lam approach did apply not only to exclusive jurisdiction clauses, but also to arbitration clauses, a hotly disputed issue in recent jurisprudence.

Victor Joffe KC, SC, instructed by King & Wood Mallesons, acted for the company. Laurence Li SC and Sik Chee-Ching, instructed by Chow & Macksion Chan, acted for the petitioner.

View the full judgment here.