discretionary power of the court to wind up companies in the public interest where companies are not able to pay their debts.”[2] Inspite of this, the English Court also concluded that the Court should not encourage parties to use “the draconian threat of liquidation” as a method for bypassing an arbitration agreement, concluding that to do so “would be entirely contrary to the parties' agreement as to the proper forum for the resolution of such an issue and to the legislative policy of the 1996 Act.”[3]
The reasoning in Salford Estates does not provide a comprehensive answer to all of the issues that can arise from the interaction between insolvency and arbitration. Further, no clear guidance was given as to in what “wholly exceptional circumstances”[4] the policy aims of the Insolvency Act might be favoured over those of the Arbitration Act, other than where there was another debt not subject to an arbitration agreement that could be used as evidence of inability to pay in support of the winding up petition.
Hong Kong’s departure from the English approach
In Dayang (HK) Marine Shipping Co Ltd v Asia Master Logistics Ltd [2020] HKCFI 311, the Hong Kong Court of First Instance rejected the reasoning applied by the English Court of Appeal in Salford Estates, which the Hong Kong courts had previously adopted. In Dayang, the debtor did not dispute the unpaid debt on which the winding up petition was premised, but instead alleged that it had a cross-claim. The Court held that in order to validly oppose the winding up petition, the debtor must show that its cross-claim gives rise to a bona fide dispute on substantial grounds. The existence of an arbitration agreement should be regarded as irrelevant to the exercise of the court's discretion to make a winding-up order.
In particular, the Court rejected the contention that the presentation of a winding up petition per se amounts to a breach of an arbitration agreement and contravenes party autonomy: according to the Court, in petitioning for a winding up, a creditor is not submitting a dispute for the determination and/or resolution of the Court. That debt is ultimately
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