(A) Introduction
In Lead Good Group Ltd v Creditland Group Ltd and others, HCCT 2/2024, date of judgment: 15 August 2025, [1] the Court dismissed the appeal of Royue Limited (“Royue”) against the Charging Order absolute (“CO”) made by Master Matthew Leung over Royue’s beneficial interest in approximately 43.29% of the shares of Zhenro Properties Group Ltd (“Zhenro”), in favor of Lead Good Group Limited (“Lead Good”).
This case provides helpful guidance on the Hong Kong Courts' approach to enforcement in the context of unrecognized foreign insolvency proceedings. It clarifies that, in the absence of recognition, foreign insolvency proceedings generally do not serve as a bar to charging orders. It also reaffirms the principle of “first past the post”, allowing the creditor who enforces first to obtain priority, unless exceptional circumstances or “sharp conduct” are established.
(B) Facts
Royue was incorporated in the British Virgin Islands (“BVI”) on 28 June 2017. Lead Good obtained an arbitral award against Royue on 8 December 2023 (“Award”). On 11 January 2024, leave was granted in Hong Kong for Lead Good to enforce the Award against Creditland Group Limited, Royue and 正荣集团有限公司.
Subsequently, on 29 May 2024, Lead Good applied for a Charging Order nisi over Royue’s shares in Zhenro, which was granted on 23 July 2024. On 9 December 2024, Master Leung maade the CO.
Royue appealed against the CO on 23 December 2024 and sought to adduce additional evidence, including a winding-up order against Royue granted by the BVI court on 14 April 2025.
Further, Royue attempted to apply for recognition of the BVI insolvency in Hong Kong. However, it was opposed by its creditors, including Lead Good. No application for recognition has been made in Hong Kong.
(C) Issues
The Court considered the following issues:[2]
(1) Whether foreign insolvency proceedings against Royue, which have not been recognised in Hong Kong, may be relied upon to resist Lead Good’s application for a charging order absolute.
(2) Whether there is “undue prejudice” to other creditors of Royue if Lead Good obtains a charging order absolute.
(3) If the Court is to consider that unrecognised foreign liquidation would tilt the balance in favour of Royue’s case, whether there are exceptional circumstances that would justify the Court in making the order absolute nonetheless.
(D) Decision
The Court reaffirmed its discretion to grant a charging order, taking into account all relevant circumstances, including the potential prejudice to other creditors.[3]
The Court also dismissed Royue’s appeal with costs to Lead Good on the following grounds:
(1) Issue 1: The Court followed the principles established in 2 English authorities namely, British Arab Commercial Bank plc v Algosaibi and Bros Co [2011] 2 CLC 736 (“British Arab Commercial Bank”) and OOO Nevskoe v UAB Baltijos [2023] BCC 689, which indicated that, in cases of unrecognized foreign insolvency, the Court should generally prioritize the enforcement of judgments and the rights of the judgment creditor. The absence of recognition of Royue’s BVI insolvency in Hong Kong means the Court cannot consider the foreign insolvency as a basis to reject the application for making a charging order absolute.
(2) Issue 2: The Court followed the analysis in British Arab Commercial Bank. Undue prejudice and sharp conduct by the judgment creditor must be demonstrated to justify withholding the Court from make a charging order absolute. The concept of “undue prejudice” does not automatically arise merely because the charging order grants priority to one creditor. Further, the threshold for establishing sharp conduct is high. Lead Good’s actions, including enforcing the CO and acting swiftly to obtain priority, did not amount to sharp conduct.
(3) Issue 3: This issue did not arise because of the Court’s view on Issue 1.
(E) Key Takeaways
In conclusion, this case clarifies the limits of using foreign insolvency proceedings as a shield in Hong Kong enforcement proceedings. Unrecognised foreign insolvency proceedings generally do not prevent Hong Kong Courts from granting charging orders. In the absence of recognition, the principle of “first past the post” applies, which means that the creditor who enforces first is likely to gain priority, unless there are exceptional circumstances or “sharp conduct”. Further, “sharp conduct” is a high threshold. Mere enforcement actions or swift pursuit of judgment do not constitute sharp conduct.
[1] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=171426&currpage=T
[2] Lead Good Group Ltd v Creditland Group Ltd and others, §2
[3] Ibid, §10-12
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