X AND ANOTHER v. ZCo

HCCT 33/2023

[2024] HKCFI 695

(amended and redacted version)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 33 OF 2023

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REASONS FOR DECISION

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Background

1.  This is another case of a losing party in an arbitration coming to court to launch a challenge to an award by “repackaging” (to use the term adopted by Counsel for the Defendant) arguments which had not been made the focus of submissions to the tribunal, and presenting them to the Court as key issues which had not been dealt with by the tribunal.

2.  After hearing the submissions of the parties at a hearing in October 2023, this Court dismissed the Plaintiffs’ application to set aside the award, and the following sets out the reasons for my decision.

3.  The Plaintiffs entered into a Share Subscription and Purchase Agreement (“SPA”) with the Defendant (“ZCo”), for ZCo to purchase from the 2^nd Plaintiff (“YCo”) shares in XXXXXXXXXXXXXXXXXXX (“Company”). Upon completion of the SPA, ZCo held 65% and YCo held the remaining 35% of the shares in the Company.

4.  The 1^st Plaintiff (“X”) is the CEO of a company which operated various hospitals and clinics on the Mainland through YCo. At the material time, the Company and its subsidiaries operated a healthcare business which included a private hospital in XXXXXXX (Hospital (“H”)). H operated its business on leased premises under a series of lease agreements (“H Lease”).

5.  Disputes arose under the SPA, and ZCo as claimant commenced arbitration against X and YCo as respondents (“Arbitration”), for their alleged failure to complete the purchase of shares following ZCo’s exercise of an exit right conferred on it under section 7.5 of the SPA (“Exit Right”). The relevant clause states:

“7.5 Renewal of H Lease and Exit Right

(i) As soon as practical after the Closing, the Warrantors shall use their best efforts to assist H to initiate the negotiation with the landlords to renew the current lease agreements (the ‘H Lease’), and the Warrantors shall covenant and ensure that in no event later than June 30, 2020, or in the case that the H Lease has been extended, eighteen (18) months before the expiry date of the extended term (the ‘Renewal Deadline’), H shall have renewed the H Lease with the landlords for at least five (5) more years for a rental price in line with the then market level and based on other terms and conditions substantially consistent with the H Lease, under which H shall be entitled to use the leased properties for its hospital operation at least until December 31, 2026. The Warrantors’ performance of the foregoing obligations is conditioned on the Investor and its appointed directors procuring and ensuring that the Board and the board of H have irrevocably authorized the Warrantors to negotiate the renewal of the H Lease in accordance with this Section...

(ii) If the H Lease has not been renewed by the Renewal Deadline, at any time within two (2) months following the Renewal Deadline (the ‘Exit Right Exercise Period’), the Investor shall be entitled to issue a written notice to the Warrantors (the ‘Exit Notice’) to require the Warrantors to purchase all the Shares held by the Investor at that time (the ‘Exit Shares’) at the Exit Price (such exit right of the Investor, being the ‘Exit Right’) (for the avoidance of doubt, if the Investor fails to issue the Exit Notice within such two (2)-month period, the Investor shall not be allowed to exercise the Exit Right.). For these purposes, the ‘Exit Price’ shall equal to the original investment costs that the Investor has paid in acquiring the Exit Shares plus such additional amount that would yield an investment return on the original investment costs calculated at 3.75% compounded annually starting from the Closing Date until the date of the full payment of the Exit Price (but shall exclude the period from the Renewal Deadline to the date the Warrantors receive the Exit Notice, the ‘Interest Exemption Period’) ... If the Warrantors has renewed the H Lease before the expiry date of the H Lease (such renewal is for at least five (5) more years at a rental price in line with the then market level and based on other terms and conditions substantially consistent with the H Lease) after the Investor exercises its Exit Right, the Warrantors shall issue a written notice to the Investor within seven (7) days following renewal of the H Lease, and the Investor has the right, but not the obligation, at any time within two (2) months after receipt of such notice, to require the Warrantors to sell the Exit Shares back to the Investor … at a price equal to the Exit Price minus Tax that the Investor has paid in connection with the exercise of the Exit Right.” (Emphases added)

6.  In the Arbitration, ZCo claimed that it had exercised the Exit Right under section 7.5(ii) to demand X and YCo to purchase its shares in the Company (“Exit Shares”) at a specified exit price. X and YCo (together referred to as “Respondents”) denied their liability to purchase the Exit Shares, and the Arbitration concerned whether ZCo was entitled to exercise the Exit Right, and if so, whether ZCo was entitled to specific performance and/or damages in lieu. On 15 March 2023, the tribunal issued an award which found in favor of ZCo (“Award”).

7.  By their Originating Summons issued on 14 June 2023, X and YCo seek to set aside the Award, on the stated grounds of their inability to present their case, and/or that the arbitral procedure was not conducted in accordance with the parties’ agreement.

8.  By way of support of these grounds, X and YCo claim, firstly, that their obligation to repurchase ZCo’s shares under section 7.5(ii) was only triggered upon the satisfaction of a condition precedent as set out in section 7.5(i) of the SPA (“Condition Precedent”), and as the Condition Procedent was not satisfied, they had no obligation to repurchase the Exit Shares at all. This is referred to as the “Condition Precedent Defence”.

9.  Further, X and YCo claim that even if they were liable for specific performance, on the proper interpretation of section 7.5(ii) of the SPA or by reason of an implied term, tax liabilities arising from completion of the transfer of the Exit Shares should be borne by ZCo and should thus be deducted from the Exit Price payable (“Tax Defence”).

10.  As explained by Counsel for X and YCo, the Condition Precedent Defence and the Tax Defence were separate and independent of their other defences raised in the Arbitration, which were that: they were not liable to purchase the Exit Shares by virtue of force majeure as provided for in section 7.5(i)(E) of the SPA; there was an implied term in the SPA that the Exit Right can only be exercised if the failure to renew the H Lease by the specified deadline was due to the fault of X and YCo; that section 7.5(ii) of the SPA was unenforceable as a penalty; that ZCo was estopped from enforcing the Exit Right; and that specific performance was inappropriate and should not be ordered, as damages were an adequate remedy.

11.  X and YCo claim that the tribunal failed, in the Award, to consider the Condition Precedent Defence and the Tax Defence when it determined the Exit Price to be paid under the Award, and that accordingly, the arbitral procedure was not conducted in the manner agreed.

12.  Counsel for X and YCo further argued that if the tribunal did not consider the evidence or arguments submitted by the parties, and failed to take into account some arguments and evidence important to the decision, the tribunal “is not listening” and there was no real opportunity for the party to be heard. The tribunal’s failure to consider and deal with issues has therefore been linked in this case to the inability to present ground for setting aside, the former being the real complaint.

13.  The public policy ground is likewise premised on the tribunal’s alleged failure to deal with an issue, to render the procedure not being in accordance with the arbitration agreement, and to be shocking to the conscience of the court to enforce the award.

Applicable legal principles

14.  It is not disputed that the grounds for refusal of enforcement are to be construed narrowly, such that only conduct “sufficiently serious or egregious” amounting to a denial of due process suffices to warrant an order to either set aside or refuse enforcement of an award (Grand Pacific Holdings v Pacific China Holdings Ltd [2012] 4 HKLRD 1, and LY v HW [2022] HKCFI 2267).

15.  In relation to the ground of a tribunal’s failure to deal with an issue, this Court repeated a summary of the relevant principles in the recent case of CNG v G&G [2024] HKCFI 575, at paragraphs 25 to 27 of the Reasons for Decision.

16.  In both LY v HW and CNG v G&G, the Court emphasized that the proper approach in reviewing an award is by reading it generously, in a reasonable and commercial way expecting, as is usually the case, that there will be no substantial fault that can be found with it, and always bearing in mind the policy of minimal curial intervention as highlighted in AI & ors v LG II [2023] 4 HKC 135, adopting AKN & anor v ALC & ors [2015] 3 SLR 488. Any inference that a tribunal has failed to consider an important issue is to be made only if it is clear and virtually inescapable.

17.  The principles stated in the above authorities will not be repeated here.

18.  At paragraph 1 of CNG v G&G, this Court set out matters and practices abhorred in applications to challenge an award, but I regret that this case is one of the impermissible attempts frowned upon.

Failure to deal with the Condition Precedent Defence?

19.  A more unusual feature of this case, which is different to the usual instance of a party claiming that an issue which had been included in an Agreed List of Issues for the tribunal (“List”) was not dealt with by the tribunal in the award, is that as highlighted for ZCo, the Condition Precedent was not even mentioned in the List which was submitted to the tribunal in the Arbitration, in accordance with the tribunal’s request made prior to the hearing. ZCo argued that as the List is a significant document used by both parties to identify the key issues for determination in the Arbitration, and as both parties had chosen to structure their pre-hearing submissions around the List, the omission of the Condition Precedent Defence in the List demonstrates that it was not an issue which had been raised or put to the tribunal for determination, and was certainly not a live issue by the time of the commencement of the Arbitration and when Opening Submissions were made.

20.  According to Mr Chapman KC who appeared for ZCo, the Condition Precedent Defence was included in the Statement of Defence, as paragraph 14.1 of the Statement of Defence pleads that “the Respondents’ obligations in respect of the Exit Right would only be triggered if and when the Condition Precedent is fulfilled”. However, Mr Chapman submitted that X and YCo had never claimed that they had never been properly authorized to negotiate a renewal of the H Lease. The entire thrust of the Respondents’ case at the hearing of the Arbitration was that X had the authority to negotiate the renewal of the lease, but that he had been prevented from doing so by reason of force majeure, in that the Covid-19 pandemic and travel restrictions imposed on health professionals caused delay in the renewal of the H Lease. Mr Chapman pointed out that it was common ground in the Arbitration that the H Lease was in fact successfully renewed by X, but the ultimate renewal did not take place until after ZCo’s Exit Right had been crystallized. There was no suggestion in the Arbitration that X had not been appropriately authorized.

21.  ZCo’s Reply in the Arbitration accordingly stated (at paragraph 32) that “the Respondents’ authority to renew the (H Lease) has never been in doubt”, and that it was the Respondents’ own case that the H Lease was successfully renewed, albeit not within the relevant contractual deadline.

22.  It was also ZCo’s case in the Arbitration that section 7.5(i) of the SPA did not apply to the obligations relied upon by ZCo in respect of section 7.5(ii) of the SPA. This was the pleading made in paragraphs 33 to 35 of the Statement of Reply. On ZCo’s case, the Condition Precedent only applies to the “foregoing obligations” contained in section 7.5(i) of the SPA, and not the exit provision in section 7.5(ii). It was highlighted that there was no response from the Respondents to these contentions, and that after the service of the Statement of Reply, the Condition Precedent Defence did not surface again in the remainder of the Arbitration, as there was no reference to the argument in the Statement of Rejoinder, it was not featured at all in either the List or the Respondents’ Opening Submissions in the Arbitration, was not referred to in the oral submissions made at the hearing, and did not feature in the Closing Submissions served on behalf of the Respondents.

23.  In the List, issue 1 was framed as follows:

“Investor’s entitlement to exercise the Exit Right

Is the Investor entitled to exercise the Exit Right in Section 7.5(ii) of (the SPA) by its Exit Notice of 20 August 2020 (subject to the defences below)?”

Did the Respondents acknowledge and accept the Investor’s entitlement to exercise the Exit Right? If so, are the Respondents now estopped from raising the defences below?”

The “defences below” were identified in the List as the force majeure, implied terms, penalties, estoppel, and relief defences. The Condition Precedent Defence was not mentioned at all.

24.  I have observed, in the different authorities referred to by Counsel in this case, that the List is a useful document to frame the issues which the parties consider and agree to be relevant to the tribunal’s consideration, but that it cannot dictate the manner in which the tribunal deals with the issues raised in the award and how it answers the key issues.

25.  The mere fact that an issue which had been included in the List was not been expressly dealt with in the award cannot necessarily mean that the tribunal had failed to consider and deal with an issue, but the fact that an issue was not included in the List is a strong indication that the issue was not regarded by either the parties or the tribunal to be a relevant or key issue for consideration and determination in the Arbitration. In CNG v G&G I observed at paragraph 26 of the Reasons for Decision that an agreed list of issues is not an exam paper with compulsory questions for the tribunal to answer in the Award, but in this case, it is clear that the Condition Precedent was not even a question put to the tribunal to answer at all.

26.  It was further pointed out for ZCo that by the time of the hearing of the Arbitration, there was “no real dispute about ZCo’s entitlement to exercise the Exit Right”, and that this was in fact recorded at paragraph 69 of the Award, with the tribunal pointing out that this was “subject to the various defences raised”. According to Counsel for ZCo, these were the defences specifically set out in the List - without the Condition Precedent Defence. I have read the transcript of the hearing on Day 1, and accept the submissions made by Mr Chapman that the only defences raised by Counsel for ZCo and Counsel for the Respondents in their opening were those identified and named in the List.

27.  On behalf of X and YCo, Counsel argued that in assessing whether an issue had been put to the tribunal, the Court should consider the Notice of Arbitration, the Answer, the pleadings in the Arbitration, other documents submitted to the tribunal such as the List, the opening statements, the evidence adduced, the closing submissions, as well as the parties’ understanding as to what was put to and accepted by the tribunal. It was further contended that the Court should also consider the developments in the course of the Arbitration, in order to ascertain issues which may have surfaced in the course of an arbitration, and which is known to all the parties to be within the scope of the submission - even if such issues were not part of any agreed list of issues, or the pleadings (referring to and relying on CEF v CH [2021] SGHC 114). In particular, Counsel for X and YCo argued that unless there had been an unequivocal abandonment of a claim, a pleaded issue remains an issue to be considered by the tribunal, even if (1) it was not expressly argued before the tribunal, or (2) the issue might not have been made the subject matter of extensive submissions, or dealt with as the focus or crux of the dispute (relying on CDM v CDP [2021] SGCA 45).

28.  I cannot agree that the tribunal can be under such an onerous obligation. The nature of the dispute resolution process by arbitration in Hong Kong remains, traditionally, as being adversarial. It should not be left to the tribunal to extensively comb through all the documents, materials and notes of the proceedings to ascertain and understand the issues expressly or by implication put by a party to the tribunal for determination. The arbitral process is intended to be more costs‑effective than litigation in the courts, and the object of the Arbitration Ordinance (“Ordinance”) is to facilitate “the fair and speedy resolution of disputes without unnecessary expense” (section 3 of the Ordinance). It is not consistent with such object, if the tribunal is to be expected to find out for itself what the issues put to it are, or to look for unequivocal abandonment of any claim or issue on which the parties or their counsel had not focused or made submissions thereon in the course of the hearing.

29.  It would be more ludicrous to suggest that the Court, at a hearing for setting aside, should go through the voluminous documents filed in the Arbitration and the transcript of the entire hearing, in order to ascertain whether any issue raised in any document had been unequivocally abandoned, before accepting that all issues, however minor and irrespective of whether submissions had been made thereon, had actually been dealt with, and decided upon in the award.

30.  Hence, the prime duty and the onus must be on the parties and their representatives in the Arbitration to clearly identify and refer the tribunal to the salient issues in dispute, the issues to be decided by the tribunal, and the key issues in particular. The List is the useful starting point. The pleadings may have to be reviewed, but the tribunal, and ultimately the Court, can reasonably expect that the key issues put to the tribunal for determination would be identified in the Opening and the Closing submissions of Counsel in the hearing. If they were not, and were not addressed at the hearing, the Court and the tribunal could reasonably infer and accept that such issues did not arise from the evidence adduced for decision in the tribunal’s award, either because they were not disputed or no longer disputed by the parties, or because the evidence available did not support the issue or issues which had been raised in the pleadings, and that in any event, they are not important issues at all.

31.  It is true that the Respondents’ pleadings in the Arbitration made references to the Condition Precedent. Their Answer to the Notice of Arbitration (“Answer”) states that X and YCo’s obligation under section 7.5(i) and ZCo’s Exit Right under section 7.5(i) and (ii) were in issue. Paragraph 9 of the Answer states that ZCo may not exercise its Exit Right as it has no right to exercise, or has waived and/or is estopped and/or for other reasons precluded from exercising the Exit Right, and that the Respondents are not obliged to complete the purchase. The Answer states at paragraph 13.4 that the Condition Precedent for exercising the Exit Right does not exist. These are mostly general averments, without particularization as to why ZCo had no right, or were precluded from exercising the right.

32.  In any event, when ZCo pleaded its case on the construction of sections 7.5(i) and (ii) and that the Condition Precedent does not extend to the obligations in section 7.5(ii), there was no further reference to the Condition Precedent Defence in the opening submissions, nor in the later closing submissions of X and YCo, and the Condition Precedent Defence was not included in the List. Counsel for X and YCo argued that an issue which may not have featured in any agreed list, or pleading, nor in opening statements because of the limited time allocated to a party, may nevertheless remain an issue put to the tribunal, relying on the assumption that the arbitrators would have “full knowledge of the written submissions and evidence that is already on the record” (a reference made in Redfern and Hunter on International Arbitration (6^th edition) at paragraph 6.172). However, that is not a point of much assistance in this case, as the Condition Precedent Defence was not even dealt with or contained in the written submissions served on behalf of X and YCo. The evidence referred to by ZCo, that the H Lease had been renewed without question as to X’s authorization, and that X had sought in his evidence to rely only on force majeure for the delay, is more consistent with the fact of the Condition Precedent Defence not having been pursued as an issue put to the tribunal for determination.

33.  There is also merit in the submission made for ZCo, that some of the cases cited by Counsel for X and YCo cannot support his argument that the tribunal needs to consider all pleaded issues, even if they had not been argued at length. Mr Chapman argued that the cases on ultra petita challenges, ie a challenge against the tribunal’s jurisdiction or power, merely hold that if a tribunal decides a case based on a trivial issue, or an issue that had not been substantively argued by the parties, there is no ground for setting aside the award for lack of jurisdiction since the issue falls within the scope of the reference and the opposing party already had the opportunity to deal with it. For example, the courts have held (in Reliance Industries Ltd v Union of India [2018] EWHC 822, Terna Bahrain Holding Co WLL v Bin Makil Al Shamsi & Ors [2012] EWHC 3283 (Comm), and in Z v R [2021] HKCFI 2312) that an issue which was “in the arena” or “in the play”, albeit only briefly argued or not made the focus of a party’s submissions, would still have been an issue which had been raised, and on which a party would have had the reasonable opportunity to deal with the issue, and the tribunal cannot be criticized either for having acted outside the scope of the submission and having dealt with an issue not raised or argued at length, or having failed to give the parties an opportunity to argue such issue.

34.  It suffices to say that each case must be considered on its own particular facts and the particular grounds relied upon, either to set aside or resist enforcement of the award. On the particular facts of this case, and against the background of the pre-hearing memorials and the opening and closing submissions made in the Arbitration, I am not satisfied on the materials to which I have been referred that the Condition Precedent Defence was a matter which remained to be an issue, or any key issue which was put to the tribunal for determination.

35.  I do not agree that Issue 1 of the List, and the question framed as to whether ZCo was entitled to exercise the Exit Right in section 7.5(ii), should effectively be the same as the Condition Precedent Defence. As framed, Issue 1 identified ZCo’s right under section 7.5 (ii) as being “subject to the defences” set out in the List, which did not include the Condition Precedent Defence. The tribunal dealt with Issue 1 by construing section 7.5(ii), and found that it had been validly exercised. It could only do so in the light of what was not disputed, what was disputed, and the defences put forward.

36.  Hence, the tribunal dealt with Issue 1 in the following manner:

“Issue 1: Whether the Claimant is entitled to exercise the Exit Right in Section 7.5(ii) of the SSPA by its Exit Notice of 20 August 2020

The Claiman’s position

65. The Claimant maintains that the two conditions to the exercise on the Exit Right under Section 7.5(ii) of the SSPA have been satisfied:

(1) Non-renewal of the H Leases by the Renewal Deadline: this is not in dispute;

(2) Issuance of an Exit Notice within two months, i.e. before 30 August 2020: the Exit Notice was issued on 20 August 2020, within the Exit Period.

66. Accordingly, the Claimant is entitled to exercise the Exit Right pursuant to Section 7.5(ii) of the SSPA and has properly done so by issuing the Exit Notice on 20 August 2020.

67. The Claimant further submits that the belated renewal of the H Leases in 2022 has no impact on the Claimant’s entitlement to exercise the Exit Right or the question of relief. Pursuant to Section 7.5(ii) of the SSPA, the only implication of a subsequent renewal is that the Claimant is then entitled (but not obliged) to call back the Exit Shares. That call option was never exercised, and the late renewal of the H Leases is irrelevant.”

The Respondents’ position

68. The Respondents do not dispute that the H Leases were not renewed by the Renewal Deadline. They contend that the Claimant was prevented by the defences raised by the Respondents from exercising the Exit Right.

69. Thus, there is no real dispute about the Claimant’s entitlement to exercise the Exit Right, subject to the various defences raised.

The Tribunal’s decision

70. For the reasons stated below, we have concluded that the Claimant was entitled to issue the Exit Notice.”

37.  The tribunal proceeded to deal with Issue 1 by considering and answering question 2 of Issue 1 (including whether the Respondents were estopped from raising its defences), and then each of the defences set out in the List. It cannot be said that the Condition Precedent Defence was a sub‑issue of any of the force majeure, implied terms, penalties, estoppel or relief defences.

38.  Most pertinently, I accept the submissions made for ZCo, that the Condition Precedent Defence and issue did not feature in the Rejoinder, and was not mentioned at all in the opening and closing submissions, nor in the course of the hearing. If the tribunal did not expressly deal with this issue, my finding is that it was simply because the Condition Precedent Defence had not been raised as an issue as a result of a conscious and considered decision by X and YCo not to pursue it in the Arbitration. Considering the manner in which the issues were argued and the submissions were made in the Arbitration, it is certainly not a clear and virtually inescapable inference that the tribunal had failed to deal with an important issue which had been put to it.

39.  Finally, I accept the submissions made for ZCo, that even if it can somehow be shown that Condition Precedent Defence had been put to the tribunal as an issue for determination in the Arbitration, the issue could not have made any difference to the outcome of the Arbitration. As pointed out by Counsel for ZCo, the Respondents did not claim in their Defence that X did not have the authority to negotiate or renew the H Lease. There was nothing in the evidence of X or YCo in the Arbitration, which can support the tribunal finding that the Condition Precedent Defence can be established.

40.  It is not open to X and YCo to make further submissions or to argue now, as to whether the Condition Precedent can be said on the evidence to have been precisely fulfilled, whether X having de facto authority is the same as his having obtained the authorization from the board, and whether under Mainland law, X had the authority as representative to conduct all civil activities on behalf of H. Those submissions should have been made before the tribunal. It is trite, that it is not for this Court to review the Award on the ground that any decision of the tribunal was wrong in law, or was not supported by evidence.

Failure to deal with the Tax Defence?

41.  The alleged Tax Defence as argued at the hearing before this Court is clearly an instance of a losing party seeking to reargue the claims made in the Arbitration with a totally different focus.

42.  The List includes an issue as to relief, and whether (as an alternative to specific performance) ZCo is entitled to damages in lieu. Obviously, and in view of the pleadings and claims made in the Arbitration, this includes putting to the tribunal the issue of the quantum of any damages recoverable.

43.  X and YCo sought to argue that the tribunal should have but failed to consider their argument, that under section 7.5(ii) of the SPA, or alternatively an implied term thereof, ZCo is liable to pay any tax that may arise from the completion of the transfer of the Exit Shares, such that the tax should be deducted from the Exit Price calculated to be payable by X and YCo. They claim that there was an explicit failure by the tribunal to consider the Tax Defence, despite the clear pleading in the Statement of Rejoinder served by X and YCo.

44.  On behalf of ZCo, it was highlighted that ZCo’s Opening Submissions in the Arbitration had clearly refuted the case put forward by X and YCo on section 7.5(ii) in their Rejoinder. This was on the construction of section 7.5(ii) itself, as paragraphs 79 and 80 of ZCo’s Opening state as follows:

“79. The Respondents seek to complicate the matter by contending that ‘according to Section 7.5(ii), or alternatively it is an implied term of Section 7.5(ii), that the Claimant shall be liable for all tax liabilities that arise from the completion of the transfer of the Exit Shares’ ([A/6/211], ¶32). This is not understood.

80. Section 7.5(ii) merely provides that if (a) the Warrantors have renewed the H Lease after the Investor exercises its Exit Right and (b) the Investor decides to exercise its right to buy back the Exit Shares, then the Investor shall pay to the Warrantors the Exit Price minus the Tax that the Investor has paid in connection with the exercise of the Exit Right. This does not impose any obligations on the Investor to pay any Tax in connection with the exercise of the Exit Right.”

45.  According to Counsel, X and YCo never raised or pursued the Tax Defence again in their written Opening and Closing submissions, nor at the hearing.

46.  Of significance is the fact that after the written Closing Submissions had been served, the tribunal had specifically raised the issue of the calculation of the Exit Price, and requested the parties to make further submissions on the calculation. The question raised by the tribunal was:

“Calculation of the Exit Price. What was the amount payable as of 19 February 2021, 6 months from the Exit Notice of 20 August 2020?” (Emphases added)

47.  In answer to such question, the calculation made for ZCo was that when the Exit Price became due on 19 February 2021, the amount payable was US $XXXXXXXX, and the calculation made for X and YCo was US $ XXXXXXXXX. The tribunal adopted the lower calculation in the Award. Counsel for ZCo highlighted the fact that the calculation made by X and YCo did not take into account any tax liability, nor had they at any time during the Arbitration put forward the amount of any tax liability for the consideration of the tribunal. If it was the case of X and YCo that tax should be deducted from the Exit Price, one would reasonably expect them to use this opportunity to make this point clear, and to include the tax in their calculation for the tribunal, or otherwise to state that provision should be made therefor, or why tax should be included but the amount was for any reason not ascertained or ascertainable.

48.  Considering the question raised by the tribunal, and the calculations made by X and YCo for the tribunal, it can hardly be claimed that the Tax Defence was an important issue, when it was not included in their calculation and their submission to the tribunal, at a time when X and YCo were pointedly asked how the Exit Price was to be calculated.

49.  As Mr Chapman rightly pointed out, even if the Tax Defence was an issue which had been put to the tribunal, in the light of the submissions made by the parties on the calculation of the Exit Price, the tribunal obviously considered that it was no longer necessary to deal with the issue.

50.  I accordingly reject the claim that the Tax Defence was an issue put to the tribunal for decision, and that the tribunal had failed to deal with it.

Disposition

51.  For all the reasons outlined above, there is no ground to set aside the Award, whether on the inability to present, the failure to deal with key issues, the procedure or the public policy ground. The application made by X and YCo was dismissed, and the costs order made on 17 October 2023 was that the costs are to be paid by X and YCo to ZCo on indemnity basis.