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Jingtian & Gongcheng’s dispute resolution team secured an important victory for a creditor client (the applicant) with the landmark dismissal of an appeal by the debtor (the second respondent) against a charging order absolute over its significant shareholding in a Hong Kong-listed company.

The Hong Kong High Court ruled that the second respondent could not rely on ongoing foreign insolvency proceedings in the British Virgin Islands (BVI) – which have yet to be recognised in Hong Kong – to shield itself from enforcement.

The notable judgment regarding cross-border insolvency, handed down by Justice Anthony Chan on 15 August 2025 in Lead Good Group Limited v Creditland Group Limited (2025), confirms Hong Kong’s robust pro-enforcement approach in cross-border disputes. It provides clarity for creditors involved in foreign insolvency proceedings and highlights the importance of acting swiftly and diligently in enforcement actions.

Hong Kong court backs charging priority

The second respondent appealed against the charging order absolute made by Master Matthew Leung of the Hong Kong High Court on 9 December 2024. In the hearing, Justice Chan dismissed the appeal and ruled that for non-statutory insolvency cases, the common law principle “first past the post wins” should be the applicable general rule.

The high court reaffirmed its stance that formal recognition was required before it would give effect to a foreign insolvency. Also, the court for the first time provided guidance on its power to grant the charging order and clarified the meaning of “undue prejudice” under s.20(3)(b) of the High Court Ordinance (Cap.4).

Attempts to obstruct applicant fail

The second respondent is a company registered in the BVI. In January 2024, the applicant obtained leave from the Hong Kong court to enforce a China International Economic and Trade Arbitration Commission (CIETAC) arbitral award against the respondents (the recognition order).

In an attempt to obstruct the applicant’s enforcement efforts, the respondents applied to set aside the order. The applicant responded by taking out an application for security, and security for costs, under order 73 rule 10A of the Rules of the High Court.

The respondents later undertook to pay such sums into court, but failed to do so. Their setting aside application was accordingly dismissed.

In May 2024, the applicant applied for a charging order nisi (to secure payment of debt) over the shares of a Hong Kong-listed company owned by the second respondent, which was granted in July 2024.

Insolvency and appeal

The second respondent later claimed to be in financial distress and applied to the BVI court in June 2024 for “light touch” provisional liquidation with a view to restructuring its debts.

Since it was already “insolvent”, the second respondent argued that allowing the applicant to continue with enforcement would cause prejudice to other creditors – so requested discharge of the charging order nisi.

In December 2024, after considering the parties’ expert evidence on the financial status of the second respondent – namely whether the second respondent was insolvent at the material time – the court ruled that the charging order nisi be made absolute.

But matters did not end there. In April 2025, the BVI court made a winding-up order against the second respondent after its provisional liquidators reported failure to restructure the company. The second respondent then appealed against the charging order absolute, arguing that its subsequent winding up constituted a change of circumstances, and asked the Hong Kong court to exercise its discretion afresh to set aside the charging order absolute.

Recognition required for foreign insolvency

The judge considered two major issues in this appeal.

1. Must the foreign insolvency be recognised in Hong Kong before it can be given effect? The court held that formal recognition is required before Hong Kong will give effect to foreign insolvency proceedings.

Following established common law precedents in British Arab Commercial Bank plc v Algosaibi and Bros Co (2011) and OOO Nevskoe v UAB Baltijos (2023), the court held that the rule of pari passu (on equal footing) distribution of assets applies to domestic insolvencies, while the common law “first past the post wins” principle should generally apply to foreign insolvency (sometimes referred to as non-statutory insolvency).

In this case, there was no recognition of the BVI insolvency in Hong Kong.

Further, as the BVI winding-up order provided that the liquidators of the second respondent could apply for recognition of their appointment in any foreign countries, it could not be said that the second respondent insolvency was intended to have extra-territorial effect automatically or without recognition.

Therefore in this case, the Hong Kong position remains that formal recognition is required before a Hong Kong court will give effect to foreign insolvency proceedings.

In this ruling, the court made an important distinction between domestic and foreign insolvencies.

The judge remarked that if the winding-up order was made in Hong Kong, the court would decline to make a charging order absolute because under the rule of pari passu, distribution should be preserved for all creditors of the debtor in question, and no creditor should be allowed priority over the others.

However, the court confirmed that in foreign insolvencies, the applicable principle is “first past the post” unless formal recognition has been obtained.

2. Would the charging order absolute cause “undue prejudice” to other creditors? Under section 20(3)(b) of the High Court Ordinance, when deciding whether to grant a charging order, the court must consider all circumstances, in particular “whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order”.

Adopting the common law position, the court clarified that the expression of “undue prejudice” means whether other creditors would suffer “some prejudice over and above the prejudice they would inevitably suffer”.

The fact that a charging order gave one creditor priority over other creditors was not “undue prejudice” because such security and priority were inherent in the making of a charging order.

Instead, “undue prejudice” required something more, such as “sharp conduct” by the judgment creditor – for instance, putting other creditors off the scent by purporting to agree to forego immediate pursuit of a claim, acting in undue haste to obtain a preferred position, and unfair use of special knowledge.

The court ruled that undue haste in obtaining a preferred position could not be equated with acting with urgency to take enforcement action.

It held that the applicant was acting within its rights in seeking priority through a charging order.

Practical implications

The second respondent’s attempts to evade the enforcement efforts in Hong Kong by taking advantage of foreign proceedings proved to be unsuccessful.

Importantly, the Hong Kong court provided crucial guidance on the meaning of “undue prejudice”.

Following this appeal ruling, creditors will no doubt act promptly and diligently when taking enforcement actions in Hong Kong.

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