City Gardens Limited v DOK82 Limited

In a winding-up petition, an exclusive jurisdiction clause in favour of a foreign court does not prevent the English Companies Court from deciding whether the petition debt is genuinely disputed on substantial grounds. Where foreign law is relied upon but no material difference from English law is shown, the court may apply English law or the presumption of similarity. The dispute must be supported by a properly articulated case with a real prospect of success. A speculative construction argument or an inadequately particularised cross-claim will not suffice. A contractual reporting obligation is not readily treated as a condition precedent to liability, especially where that construction would produce disproportionate consequences. A cross-claim does not prevent a winding-up order where it does not reduce the admitted debt below the statutory threshold.

City Gardens Limited appealed against District Judge Matharu’s dismissal of its winding-up petition against DOK82 Limited. The petition relied on a Memorandum of Understanding under which DOK82 acknowledged a principal debt of £119,785, arising from refunded furniture-pack payments connected with an abandoned development.

The District Judge held that the contract’s exclusive Hong Kong jurisdiction clause and Hong Kong governing law prevented the English court from determining whether the debt was due or disputed. The central issues on appeal were whether that approach was correct, whether the debt was genuinely disputed on substantial grounds, and whether an asserted cross-claim or alleged non-compliance with a contractual statement obligation prevented the petition from proceeding.

1. Appeal allowed. The order dismissing the petition was set aside and replaced with an order winding up DOK82 Limited.
2. The exclusive jurisdiction clause was irrelevant to the Companies Court’s task. Under Insolvency Act 1986, sections 122 and 123, the domestic court had to determine whether City Gardens was genuinely a creditor and whether the petition debt was disputed in good faith on substantial grounds. BST Properties Ltd v Reorg-Apport Penzugyi RT [2001] EWCA Civ 1997 was binding authority on that point.
3. The burden lay on DOK82 to assert and show that Hong Kong law differed materially from English law. No such material was produced. Applying the approach in Citigate Dewe Rogerson Ltd v Artaban Public Affairs Sprl [2009] EWHC 1689, and the limits of the presumption of similarity discussed in FS Cairo v Brownlie [2022] AC 995, the court applied English law.
4. The applicable test was whether the dispute had a real prospect of success, analogous to the summary-judgment test described in Collier v P & M J Wright Ltd [2008] 1 WLR 653. DOK82 had not clearly advanced a case that the monthly statement obligation in clause 2.4 was a condition precedent to liability. The court applied the caution in Heritage Oil and Gas Ltd v Tullow Uganda Ltd [2014] EWCA Civ 1048 and the approach in AstraZeneca UK Ltd v Albemarle International Corp [2011] EWHC 1574.
5. The contractual figure of £119,785 was not genuinely disputed. The alleged cross-claim of £38,500 did not reduce the debt below the temporary statutory threshold of £10,000. Non-compliance with Schedule 10 to the Corporate Insolvency and Governance Act 2020 was properly waived.

• High Court (Insolvency and Companies List): City Gardens Limited’s petition was dismissed by District Judge Matharu on 25 July 2022.
• High Court, on appeal: permission was granted by Fancourt J on 12 December 2022. The appeal was allowed, the order below was set aside, and a winding-up order was substituted.