In re NaaS Technology Inc, a debtor company applied to, inter alia, restrain the presentation of a winding up petition on the ground that there was a genuine and substantial dispute as to the debt which had been demanded by way of a statutory demand. The company alleged that:

1. the parties entered into a series of agreements which were governed by New York law and contained arbitration clauses in favour of Hong Kong;
2. it was the company’s suspicion that the creditor had participated in manipulative short selling of the company’s stock for its own benefit; and
3. arbitration proceedings between the parties were commenced as a result of alleged breaches of the implied duties of good faith and fair dealing pursuant to the agreements and were ongoing.

Justice Doyle dismissed the company’s summons on the basis that the debt was not disputed on genuine and substantial grounds. The Court followed the Privy Council decision in Sian v Halimeda  (an appeal from the BVI which was anticipated to receive attention from other common law jurisdictions - read here) and the recent decision of the Grand Court of the Cayman Islands in ICM SPC v Jarvis, which represents settled Cayman Islands law on the issue. In assessing whether the company had shown that there was a genuine and substantial dispute as to the debt, Justice Doyle found that:

1. the whole thrust of the company’s case was based on belief and not evidence;
2. while the company “suspected” that the creditor might have been engaged in manipulative short selling of the company’s stock, the company had accepted that it had not found any evidence to substantiate this;
3. suspicions and speculation were insufficient to justify the court granting the requested relief;
4. the commencement of arbitration proceedings by the company was “hallmark of a company making a belated tactical manoeuvre in a somewhat hopeless endeavour to delay the presentation and determination of a winding up petition in respect of which there is no genuine dispute of the debt on substantial grounds”; and
5. in the circumstances, there was no satisfactory evidence before the Court to enable it to conclude that the claims of the company were genuine, serious and of substance.

This decision reinforces that the Cayman Islands and the BVI remain creditor friendly jurisdictions as the laws of both jurisdictions are ad idem on the interplay between insolvency and arbitration proceedings and a winding up petition cannot be delayed by meritless attempts at arbitration – the relevant test to be applied is whether the debt is disputed on genuine and substantial grounds.