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Before the Court of Appeal ("theCA") was, in this case, the Plaintiff's renewed application for an interim anti-suit injunction ("ASI") against the Defendant pending determination of its appeal, pursuant to a Summons filed on 26August2025 ("the Summons").
The Plaintiff is a Cayman Islands company which has guaranteed a term loan taken by its subsidiaries from the Defendant bank. The loan was not repaid, and the Defendant served a statutory demand in the Cayman Islands. The Term Facility Agreement ("theTFA") governing the loan contained an arbitration agreement requiring disputes to be "finally resolved" by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC), with Hong Kong law governing the arbitration agreement. In response to the statutory demand, the Plaintiff sought, by way of an Originating Summons ("the OS"), an ASI in Hong Kong to restrain the Defendant from pursuing winding-up proceedings in the Cayman Islands.
The OS was dismissed at first instance by the Recorder. The Recorder held that the arbitration agreement was not breached because only disputes that would be "finally resolved" were caught. Cayman winding-up proceedings, applying Caymon Islands law (unlike Hong Kong law), would not finally resolve the Plaintiff's indebtedness and therefore did not infringe the arbitration agreement. The Recorder also considered the merits of the Plaintiff's defence, found them hopeless and frivolous, and concluded that it was an abuse of process to rely on such a defence to restrain the Defendant from invoking Cayman insolvency jurisdiction.
On appeal, the CA considered the principles governing interim injunctions pending appeal. In Registrar of Hong Kong Institute of Certified Public Accountants v X [2017] 3 HKLRD 541, the Court stated that an applicant must demonstrate "a real prospect of success on appeal". The grant of an injunction is not automatic, even if one might have been granted pre-trial, and the merits of the defence remain relevant when assessing whether an ASI should be granted.
The Plaintiff advanced five grounds of appeal: (1) misinterpretation of the arbitration agreement; (2) improper reliance on Cayman law; (3) misapplication of Cayman law; (4) irrelevance of merits to ASI; and (5) erroneous findings on the defence. The CA accepted that the Plaintiff's construction argument was reasonably arguable, noting that "finally resolved" might mean that arbitration was intended to produce a conclusive resolution of disputes. The CA further found that two of the other grounds relating to Cayman law would rise and fall with this issue and required no further consideration.
The CA, however, rejected the Plaintiff's contention that the merits of its defence were irrelevant. Under Hong Kong law, an ASI would normally have been granted in respect of winding-up proceedings brought in breach of an arbitration agreement "in the absence of strong reasons", and the lack of any bona fide dispute to the petitioning debt could constitute an abuse of process as well as such strong reason not to grant an ASI.
Furthermore, the CA held that the ASI sought by the Plaintiff was a quia timet injunction to prevent the Defendant from bringing winding-up proceedings because of an unmet statutory demand. The Plaintiff's evidence clearly referred to and relied upon the prospects of such proceedings. ASI applications also could not be considered in a vacuum. The merits of the defence must be assessed as part of the court's discretion.
With respect to the last ground concerning the Plaintiff's defence, the CA held that in this case, the Plaintiff's estoppel argument, based on the termination of a MIGA Insurance Contract, was untenable. The Plaintiff was aware of its obligation to pay premiums, there was no evidence of waiver or reduction, and the insurance lapsed naturally. With the termination of the insurance, the Plaintiff's defence collapsed.
The CA concluded that even if the Recorder erred in his construction of the arbitration agreement, the absence of an arguable defence meant the appeal had no real prospect of success. The application would therefore fail at the first hurdle. The Summons was accordingly dismissed with costs to the Defendant, to be summarily assessed on paper.
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