Z v. R

HCCT 11/2021

[2021] HKCFI 2312

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 11 OF 2021

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Before:  Hon Mimmie Chan J in Chambers

Date of Hearing:  5 July 2021

Date of Decision:  5 July 2021

Date of Reasons for Decision: 9 August 2021

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REASONS FOR DECISION

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Background

1.This is yet another application for leave to set aside an arbitral award, on the ground that the applicant (in this case the Plaintiff) was unable to present its case, and/or that the arbitral tribunal failed to deal with all the issues which were put before it, such that the procedure was not in accordance with the parties’ agreement.

2.At the end of the hearing of the application, I dismissed the application to set aside.  This sets out the reasons for my decision.

3.The Plaintiff and the Defendant are shareholders of a joint venture company which was established in 2014 (“Company”).  The Plaintiff is a state-owned company incorporated on the Mainland, and the holder of 51% of the shares in the Company.  The Defendant is a limited company incorporated in Hong Kong, holding 32.5% of the shares in the Company.  The remaining 16.5% of the shareholding is a third entity not party to these proceedings.

4.On 23 April 2014, a Shareholders Agreement was made amongst the shareholders of the Company, which was varied by a Supplemental Agreement dated 8 October 2014 (“SHA”).  The SHA is governed by Hong Kong law.

5.In July 2019, the Defendant commenced an HKIAC arbitration against the Plaintiff in Hong Kong (“Arbitration”), claiming that the Plaintiff had breached clause 11 of the SHA which contains various restrictive covenants concerning the circumstances in which shareholders of the Company and their affiliates may, or may not, compete with the Company.  The claim was that the Plaintiff’s 50% affiliate (“G”) had submitted bids for projects referred to as the Y Project, the L Project and the AC Project, when the Company and/or its subsidiaries had also submitted bids for those Projects.  It was claimed in particular that two of the Company’s vessels, namely the A&P Vessels, were suitable for the Y Project. The Defendant claimed that the Plaintiff’s breach constituted a “material breach” of the SHA.

6.On 26 October 2020, the tribunal issued its First Partial Final Award (“1^st Award”), declaring that the Plaintiff committed a material breach of its obligations under the SHA and had failed to remedy its breach in accordance with the SHA.  Further submissions were then made as to the relief to which the Defendant is entitled as a result of the 1^st Award and a Second Partial Final Award was issued on 18 November 2020 (“2^nd Award”).

7.On 26 January 2021, the Plaintiff applied to the Court to set aside the two Awards, on the ground of its inability to present its case, and/or on the ground of infra petita as the tribunal had failed to deal with all the issues put before it.  In greater particularity, the Plaintiff claims that the tribunal had overlooked its arguments on clauses 9.9 and 9.14 of the SHA, as these were not mentioned in the tribunal’s detailed recitation of the relevant clauses in the 1^st Award.  The Plaintiff also claims that on the parties’ pleadings, witness evidence and submissions, it was clear that the availability of the vessels claimed by the Defendant to have been available for the Y Project on bareboat chartered terms, had not been a live issue, yet the tribunal made findings on their availability, and the Plaintiff was unable to present its case and had suffered prejudice as a result. Further, the Plaintiff contends that the tribunal’s interpretation of the word “available” for the purposes of clause 11 of the SHA had not been put forward by either party, nor raised by the tribunal to the parties during the Arbitration, and the Plaintiff had been deprived of the opportunity to present its case on the meaning.

The relevant SHA provisions

8.The relevant clause 11.1 (a) (i) of the SHA provides as follows:

“The Shareholders covenant with each other that, except as otherwise provided in this Agreement or otherwise agreed in writing:

(a) for so long as it, or any Affiliated Company of it, remains a member of the Company and (subject to Clause 11.2), for a period of two (2) years from the Termination Date, it or any Affiliated Company of it, will not, either on its own account or in conjunction with or on behalf of any other person:

(i) carry on or be engaged, concerned or interested, directly or indirectly, whether as shareholder, director, partner, agent or otherwise, in carrying on any business in any country where the Group conducts or has conducted business which is substantially similar or competes with the Business of any member of the Group (other than as a holder of not more than 5% of the issued shares or debentures of any company carrying on such a business traded on an internationally recognized stock exchange); However, it is agreed by all Shareholders that this Clause does not apply to any business of (the Plaintiff) or its Affiliated Company which (1) relates to any cargo manufactured by the Plaintiff or its Affiliated Company (2) is not a long term, multi voyage Time Charter Project (3) the Company does not have a suitable self-owned or bareboat chartered vessel available to bid for the project (4) any Projects (with the exception of long term, multi voyage Time Charter Projects) identified and sourced by the Plaintiff and/or its Affiliated Company before they have been identified and sourced by the Company.” (emphasis added)

9.Clause 11.1 (c) further states:

“Furthermore, it is agreed by all Shareholders that in the event of a potential conflict between (the Company) and ZPMC Shipping, preference in any potential offer to provide any marine transportation services shall be given to (the Company), so long as (the Company) owns a suitable vessel or vessels available and qualified to meet the other requirements of the project to bid for the project. In the event (the Company) does not own a suitable vessel available for any potential project or meet the other requirement of the project, ZPMC Shipping and/or its Affiliated Company are free to pursue such project outside of any constraints or limitations described in Clause 11.”

10.Clause 9 of the SHA (headed “Access to Information”) is also relevant, clause 9.9 of which states:

“Each member of the Group shall provide each Shareholder and its authorized representatives with all the information and access, during normal business hours, as is necessary to:

(a) keep it properly informed about the business and affairs of the Group and generally to protect its interests as a Shareholder;

(b) satisfy itself that the provisions of this Agreement are being met; and

(c) allow it to comply with any obligations to which it is subject under the laws.”

11.Clause 9.14 (headed “Shareholders’ Obligation”) further states:

“The Shareholders shall procure that the Company complies with its obligations under this Clause 9”

12.In gist, whilst the Defendant claimed that the Plaintiff was in breach of the non-compete provisions provided for in clause 11.1 (a) (i) (“Non-compete Clause”), when the Plaintiff’s affiliate G submitted competing bids for the Projects, the Plaintiff’s defence in the Arbitration was that the 3^rd carve-out provision of the Non-compete Clause applies, because the Company did not have a “suitable self-owned or bareboat chartered vessel available to bid” for the Y Project.  The Plaintiff further claimed in the Arbitration that the Defendant had breached the express and/or implied terms of the SHA, in failing to inform the Plaintiff of any intended bids by the Company and details of the intended bids.  The Plaintiff claimed that it and its affiliated companies were not able to know whether the Company planned to make a bid and whether they might be in the position which might be competing with the Company, and further unable to give priority to the Company for projects that were potentially targets of the Company.  The Defence was that in so far as the Plaintiff was in breach of the SHA, such breach was caused by the Defendant’s failure to provide the information in relation to the Company’s intentions to bid for the 3 Projects and the details of such bids, and by virtue of the prevention principle, the Defendant should not be allowed to take advantage of its own wrong to assert rights against the Plaintiff for its breach of clause 11.

13.It is not in dispute that the only breach of the SHA which was relied upon by the Defendant in the Arbitration was in respect of the Y Project. Its case on breach would fail if no breach could be established for the Y Project. The other two Projects were referred to by the Defendant for the purpose only of showing that the Plaintiff’s breach was significant and serious, and that the breach had not been remedied.

Tribunal’s alleged failure to deal with clauses 9.9 and 9.14

14.As summarized by Counsel for the Plaintiff, the Plaintiff’s contention in the Arbitration was that it was not able to give preference to the Company in the event of any competing bids unless it was provided with information of such bids, and the alleged breach of the SHA as relied upon by the Defendant had in fact been caused by the Defendant’s own failure to provide the requisite information to the Plaintiff.  The Plaintiff relied firstly on the express terms of clauses 9.9 and 9.14 of the SHA, which require the Company to provide each shareholder with the necessary information set out, and also to require each shareholder to procure compliance from the Company.  This has been referred to by the Plaintiff as the “Express Term Argument”.

15.Further and/or alternatively, the Plaintiff argued in the Arbitration that there was an implied term of the SHA, that the Plaintiff and/or its appointed directors should be informed by the Defendant or the Company of any intended bids to be made by the Company, and further to be provided with details of the proposed bids at the time or within a reasonable time before such bids (the “Implied Term Argument”).

16.The Plaintiff emphasized that the Express Term Argument had all along been put forward as an alternative, but distinct, ground to the Implied Term Argument, both in the Amended Statement of Defence and Counterclaim, in the Plaintiff’s written Opening, and its written Closing.  It was clearly an issue which was “put to” the tribunal.

17.The crux of the Plaintiff’s challenge to the Awards is that the tribunal failed to deal with the Express Term Argument, which the Plaintiff claims was entirely overlooked by the tribunal.  Counsel highlighted the fact that when setting out the relevant terms of the SHA, the tribunal had recited a number of provisions, but omitted to refer to significant parts of clause 9.9 and further omitted the entirety of clause 9.14.  The Plaintiff argued that when the tribunal summarized the Plaintiff’s case (at paragraph 53 of the 1^st Award), it had also failed to include clause 9.9.  There was no mention of what the express terms of clause 9.9 or clause 9.14 are understood to mean, and no consideration of what information the Company was required to provide to shareholders under the terms.  Counsel argued that when the tribunal purported to deal with matters of “construction” of the SHA, it could not have been addressing the express terms which had been on its mind.  On behalf of the Plaintiff, Counsel argued that the tribunal did not have the express terms in mind, that the express terms were not addressed in the 1^st Award, that the tribunal apparently treated the Express Term Argument and Implied Term Argument as one and the same, and that it was simply not apparent to the Plaintiff that the issue of the Express Term Argument had been considered, and dealt with by the tribunal at all in the 1^st Award.

Applicable legal principles

18.The legal principles do not appear to be in real dispute.  In determining whether the ground of the tribunal’s failure to deal with all issues is established, there has to be an “issue” which has been put to the tribunal, and it has to be shown that the tribunal failed to deal with the issue and that such failure has caused substantial injustice.  Counsel for the Plaintiff relies on Petrochemical Industries Co v Dow Chemical [2012] EWHC 2739 (Comm).  The Plaintiff accepts that the tribunal does not have to set out each step by which it reaches its conclusion, and a tribunal’s decision on an issue without giving reasons does not constitute failure to deal with it.  Counsel relies on the fact that it must be made apparent from the award that the tribunal has addressed the issues which it has to revolve, referring to the observations made by the Court in Buyuk Camlica Shipping Trading and Industry Co Inc v Progress Bulk Carriers Ltd [2010] EWHC 442 (Comm), at para 38, in the context of an application made under section 68 of the Arbitration Act 1996 to set aside an award on the ground of serious irregularity:

“… there should be some form of communication, normally in the form of a decision, by an arbitral tribunal to the parties from which the latter can ascertain whether or not an essential issue has been dealt with. It is not sufficient for an arbitral tribunal to deal with crucial issues in pectore, such that the parties are left to guess at whether a crucial issue has been dealt with or has been overlooked: the legislative purpose of section 68 (2) (d) is to ensure that all those issues the determination of which are crucial to the tribunal’s decisions are dealt with and, in my judgment, this can only be achieved in practice if it is made apparent to the parties (normally, as I say, from the Award or Reasons) that those crucial issues have indeed been determined.” (Emphasis added)

19.In N v C [2019] HKCFI 2292, this Court emphasized that a failure to deal with an issue is not equivalent to failure to deal with an argument or a submission made or advanced at the hearing.  The decision in Weldon Plant Ltd v The Commission for the New Towns [2000] BLR 496 was referred to, where the English court explained (again in the context of section 68 (2) (d) of the Arbitration Act):

“It is concerned with a failure, that is to say where the arbitral tribunal has not dealt at all with the case of a party so that a substantial injustice has resulted, eg where a claim has been overlooked, or where the decision cannot be justified as a particular key issue has not been decided which is crucial to the result.” (Emphases added)

20.As the Plaintiff also accepts, the fact that the arbitrator had not given adequate reasons for his award, or sufficiently clarified that an issue fell away because of the findings which had been made, is not tantamount to the arbitrator having failed to deal with an issue.  In Secretary of State for the Home Department v Raytheon Systems Ltd [2014] EWHC 4375 (TCC) (cited in paragraph 35 of N v C), the point was made clear:

“If the tribunal has dealt with the issue in any way, Section 68 (2) (d) is inapplicable and that is the end of the inquiry (Primera at paragraph 40-1); it does not matter for the purposes of Section 68 (2) (d) that the tribunal has dealt with it well, badly or indifferently.

…

A failure to provide any or any sufficient reasons for the decision is not the same as failing to deal with an issue (Fidelity Management v Myriad International [2005] 2 Lloyd’s Rep 508, paragraph 10, World Trade Corporation, paragraph 19). A failure by a tribunal to set out each step by which to reach its conclusion or deal with each point made by a party is not a failure to deal with an issue that was put to it (Hussman v Al Ameen [2000] 2 Lloyd’s Rep 83).

…

A tribunal does not fail to deal with issues if it does not answer every question that qualifies as an “issue”. It can “deal with” an issue where that issue does not arise in view of its decision on the facts or its legal conclusions. A tribunal may deal with an issue by so deciding a logically anterior point such that the other issue does not arise (Petrochemical Industries at paragraph 27). If the tribunal decides all those issues put to it that were essential to be dealt with for the tribunal to come fairly to its decision on the dispute or disputes between the parties, it will have dealt with all the issues (Buyuk Camlica Shipping Trading & Industry Co Inc v Progress Bulk Carriers Ltd [2010] EWHC 442 (Comm), paragraph 30).” (Emphasis added)

21.Needless to say, as it is trite, the issue before this Court is not whether the tribunal came to the right conclusion.  Whether the tribunal is right on its findings of facts and law, whether its decision is supported by evidence, whether the tribunal gave sufficient reasons for the findings, and the quality of the reasoning, are not matters for consideration.  As the Hong Kong Court repeatedly emphasized, an application made under section 81 of the Arbitration Ordinance is not an appeal on the merits or on law.  The court is not concerned with the substantive correctness of an award, but only with the structural integrity of the arbitral process and it is only when there is a serious or egregious denial of due process that the court can interfere (Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRD 1).

22.Finally, a tribunal is not required deal with each issue seriatim: it can sometimes deal with a number of issues in a composite disposal of them (see Petrochemical, paragraph 27 (iii)).

Whether the issues have been dealt with

23.In considering whether a tribunal has dealt with an issue, the proper approach is to read the award in a reasonable and commercial way (Zemalt Holdings v Nu-Life Upholstery Repairs [1985] 2 EGLR 14), which may involve taking account of the parties’ submissions.  The question is whether, properly understood, the award has dealt with an issue.  As the Court pointed out in Petrochemical, parties’ submissions do not dictate how the tribunal is to structure the disposal of a dispute referred to it, but awards often respond to the parties’ submissions and should not be interpreted in a vacuum.

24.Reading the 1^st Award as a whole, and in context, I am not satisfied that the tribunal failed to deal with the Express Term Argument, as the Plaintiff contends.

25.The tribunal considered the proper construction of the SHA from paragraph 46 of the 1^st Award.  It referred to the interpretation of a written contract as a unitary exercise, involving an interactive process (with references to the legal authorities).  It pointed out the need to strike a balance between the indications given by the language of the contract and the implications of the competing constructions. As the Plaintiff highlighted, the tribunal set out provisions of the SHA which were said to be of particular relevance to the proper construction of clause 11.  These include the definitions used, including the definitions of “Business” and of the “Group”.  The tribunal referred to clause 9.9, and the requirement of each member of the Group to provide each shareholder with all information and access as is necessary, to keep each member “properly informed about the business and affairs of the Group”. The Plaintiff pointed out that no reference was made by the tribunal here to the fact that clause 9.9 (a) refers also to the shareholder’s right to information and access as is necessary “generally to protect its interests as a shareholder”, and to satisfy itself that the provisions of the SHA are being met (provided for in clause 9.9 (c)). Nor did the tribunal refer expressly to clause 9.14, which requires the shareholders to procure that the Company complies with its obligations under clause 9.

26.After setting out the arguments of the respective parties, the tribunal set out its views on clause 11 and the language used in the clause, including (at paragraph 56f) what it considered to be the principal prohibition set out in clause 11.1 (a) (either carrying on or being engaged, concerned or interested in carrying on business which is substantially similar to or competes with the Business of any member of the Group, as defined). The tribunal then proceeded to explain its construction of the carve-out provisions (including the meaning of the word “available” in the 3^rd carve-out), by reference to the specific wording used, and the definitions of the terms used in the SHA.

27.At paragraph 64, the tribunal considered whether the construction it found could achieve a sensible commercial resolved.

28.At paragraph 65, the tribunal then stated its conclusion in the following terms:

“The Tribunal does not consider that there was any term as contended for by (the Plaintiff) requiring the Company to notify (the Plaintiff) of bids either as a matter of construction or as an implied term for the reasons identified by (the Defendant). In summary:

‘a. The alleged term simply does not arise as a matter of construction of the express terms;

b. The alleged implied term is neither necessary nor reasonable for the proper working of the SHA;

c. The SHA set out, in express terms, the obligations and requirements imposed upon the Executive Management and the Board;

d. The overall aim of the Business which the Shareholders agreed upon was as set out in clause 5.2 namely, that it should be operated on sound commercial profit-making principles with the aim of generating the maximum achievable and maintainable profits;

e. It cannot have been in the interests of the business of the Company to notify (the Plaintiff) so that it or any affiliated company of it would know whether or not the Company was going to bid in relation to long term multi voyage Time Charter projects which were at the heart of its business; and

f. It might well be, that if the Company was wholly uninterested in a particular project, it would notify (the Plaintiff) in its own interests but the idea that it would seek to stimulate or notify competition within its central sphere of business activity is commercially unrealistic.’”

29.An important consideration for any applicant who seeks to challenge an arbitral award under section 81 of the Ordinance is that the award may be set aside only if the party making the application furnishes proof of the grounds of the exclusive recourse set out in Article 34 (2) of the Model Law.  The burden of proving the existence of the grounds for setting aside is on the applicant, and of course, even if the grounds are made out, the Court has a discretion to enforce the award nevertheless.

30.The 1^st Award is commendably precise and short.  I do not agree that it is either fair or appropriate for the Plaintiff to find fault in the Award by picking holes in the manner of the tribunal’s expression of its relatively brief reasons for its findings. An award does not have to be prolix for its essential findings and reasons to be understood.  As the court highlighted in Zemalt Holdings, the courts do not approach arbitral awards with a meticulous legal eye endeavoring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration.

31.The legal framework under the Model Law is to provide for a fair and effective procedure for arbitration. There has been ample emphasis made by the courts on the requirement for fairness in the arbitral procedure, but it should not be forgotten that parties often choose arbitration as a speedy, costs effective and more flexible way to resolve disputes.  The object of the Arbitration Ordinance which provides for permitted interference by the court in arbitration is to facilitate not only the fair, but also the speedy resolution of disputes without unnecessary expense, subject of course to the observance of safeguards necessary in the public interest.

32.On my reading of the 1^st Award in the context of the claims made, the defences raised and the submissions filed in the Arbitration, it should be reasonably clear to a party in the Arbitration reading paragraph 65 of the Award that the tribunal’s finding is that there is no term requiring the Company to notify the Plaintiff of bids, whether as a matter of construction of the entire and expressed terms of the SHA, or as an implied term of the SHA. That is made clear in the statement in paragraph 65a: “The alleged term simply does not arise as a matter of construction of the express terms”.  Moreover, the tribunal went on to state in paragraph 65b that “the alleged implied term is neither necessary nor reasonable for the proper working of the SHA”. One cannot “construe” the SHA without considering and construing the express terms of the agreement, and the tribunal cannot make a finding on whether a term is implied without first having considered the express terms and what they provide for, and then deciding whether the term sought to be implied is reasonable, necessary or obvious and ought to be implied for the proper working of the SHA (including the carve-out provisions of clause 11), or whether it is inconsistent with the express terms contained in the agreement.

33.In my view, it is implicit, if not expressed, from paragraph 65 that the tribunal had considered the Express Term Argument and rejected it, for the reasons summarized in paragraph 65a to 65f.  Even if it can be said that the tribunal had not amply or clearly explained its finding or the reasons for the finding, that does not mean that the tribunal had failed to deal with the Express Term Argument which had been put to it.

34.The fact that the express terms of the SHA had been considered when the tribunal expressed its conclusion in paragraph 65 of the 1^st Award is further borne out by the statement in the following paragraph 66:

“As the Tribunal has found that there was no express or implied term of the sought contended for by (the Plaintiff), there is no question of the prevention principle applying.”

35.It is of relevance that throughout the Plaintiff’s submissions, the phrase “as a matter of construction or as an implied term” had been used, to distinguish the Express Term Argument and the Implied Term Argument. At paragraph 64 of the Plaintiff’s Closing Note, Counsel stated:

“The (Plaintiff) also contends that it was a term of the SHA that the Company would inform it of the projects for which it planned to submit bids. As explained in the (Plaintiff)’s written opinion this term arises either upon the proper construction of the SHA, alternatively as an implied term.”

36.In the course of Counsel’s closing submissions made on behalf of the Plaintiff, the contention was repeated in the following terms (at page 99 of the transcript for Day 6 of the Arbitration):

“The (Plaintiff) also contends that it is a term of the shareholder agreement that the company would inform it of the projects for which it planned to submit bids. As explained in our opening submissions, this term arises either upon a proper interpretation of the shareholder agreement, alternatively by implication.”

The distinction used by the Plaintiff must have been made apparent to the arbitrators, as Sir Richard Field took it up at page 102 of the same transcript, when he interjected to raise a question on how it could be said that the implied term was necessary, but adding immediately that “it may be that you still have a construction argument”.

37.The phrase “proper construction” or “proper interpretation” had been used by the Plaintiff in the Arbitration in the context of the Express Term Argument, against its alternative case of the implied term. It was natural that the phrase was adopted by the tribunal at paragraph 65 of the 1^st Award, to refer on the one hand to construction of the express terms of the SHA, and on the other hand to the Implied Term Argument.

38.I also reject the suggestion that the mere failure to recite the entire provision of clause 9.9 and clause 9.14 in paragraph 47 of the 1^st Award can mean that the tribunal did not have the relevant provisions of clause 9 in mind when it made its decision.  As Counsel for the Defendant pointed out, the tribunal was referring in paragraph 47 to provisions of the SHA “of particular relevance” to the construction of clause 11.  Paragraph 53 of the 1^st Award is in turn a “summary” of the Plaintiff’s position and contentions.  The tribunal’s failure to set out the entire case and all the arguments made by the Plaintiff in the Arbitration cannot mean that the tribunal had not considered the entire effect of the SHA on the duties and rights of the parties to the SHA.

39.The crucial or key issue for the tribunal’s determination is whether the Defendant was in breach of its obligations under the SHA to provide the necessary information and access to the Plaintiff, such that the Defendant cannot rely on its own breach.  That issue was dealt with and decided against the Plaintiff, as made clear by the tribunal in paragraphs 65 and 66 of the 1^st Award.  It found that there was no term in the SHA, and no duty on the Company to notify the Plaintiff of its intended bids.  Whether the Defendant was in breach of clause 9 as contended by the Plaintiff - by failing to provide information which was necessary to keep the Plaintiff informed about the affairs and business of the Group, or by failing to provide information and access which was necessary to protect the Plaintiff’s interests as a shareholder, or to provide information and access which was necessary to satisfy the Plaintiff that the provisions of the SHA were being met, were only arguments in support of and submissions made on the question of breach.  That question of breach was considered by the tribunal and expressly rejected.  Whether that decision is right, or wrong by virtue of its erroneous construction of clause 9.9 or 9.14, is not relevant for the present purpose before the Court.

40.It is pertinent that submissions were made in the Arbitration as to whether clause 9.9 of the SHA actually requires the Company to provide the shareholders with information on competing bids, and that if the Company had no duty to notify the Plaintiff of competing bids, then the Defendant as shareholder was under no duty to procure the Company to inform the Plaintiff of competing bids.  On the Defendant’s pleaded case, clause 9.14 is irrelevant (paragraph 88 of the Statement of Reply).  As apparent from the Plaintiff’s Opening Submissions, it was argued that if there was such an obligation on the Defendant or on the Company to inform the Plaintiff of the details of the Company’s intended bids, the Plaintiff would have used the confidential information to the advantage of G, and to the detriment of the Company.  These are matters known to the parties and the 1^st Award must be read in the context of the pleadings and the submissions and arguments made on the questions in dispute in the Arbitration.

41.The Plaintiff also sought to find fault with the statement in paragraph 65 of the Award, when the tribunal rejected the contention of the Plaintiff, either as a matter of construction or as an implied term “for the reasons identified by (the Defendant)”.  The submission of Counsel is that: “This shows that to the mind of the tribunal, the ‘issue’ could have been dealt with by adopting the Defendant’s submissions.  But it is apparent that even the Defendant had overlooked the Express Term Argument and failed to address it at length or at all” (by reference to the Reply, and opening and closing submissions of the Defendant).

42.First, I agree with the Defendant that when the tribunal referred to “the reasons identified by (the Defendant)”, when it rejected the term contended for by the Plaintiff as requiring the Company to notify the Plaintiff of bids, it was referring to the reasons identified by the Defendant for the implied term.  Second, even if the tribunal had rejected the term contended for by relying on inadequate reasons identified by the Defendant, or for the wrong reasons, that goes nowhere to establishing that the tribunal had failed to deal with the issue. 

43.To conclude, and for all the above reasons, I reject the Plaintiff’s claim that the Award should be set aside on the ground that the tribunal had failed to deal with the Express Term Argument put to the tribunal.

Whether the Plaintiff was unable to present its case

44.The Plaintiff makes two contentions in relation to its claim that it was unable to present its case in the Arbitration.

45.First, it claims that it was unable to present its case on the possibility of a bareboat charter of the GS Vessels being made available for the Y Project. Secondly, it claims that it was unable to present its case on the meaning of the word “available” used in the 3^rd carve-out of clause 11 of the SHA, and as found by the tribunal.

The availability of the GS Vessels

46.To recap, the Non-compete Clause in clause 11 does not apply to any business of the Company or its affiliated company when the Company “does not have a suitable or bareboat chartered vessel available to bid for the project”.  Applying the clause and the relevant carve-out to the facts of the case, the Plaintiff and its affiliate G would not be in breach of clause 11 by virtue of their submitting bids for the Y Project, if the Company did not at the relevant time have a “suitable self‑owned or bareboat chartered vessel available” to bid for the Y Project.

47.The Plaintiff claims that the issue of whether the GS Vessels could have been made available on a bareboat chartered basis was never in the arena, until the Plaintiff’s witness (“Mr M”) was cross-examined, and the Defendant contended for the first time in its closing submissions that the Company could have offered the GS Vessels on bareboat charter terms, and that the GS Vessels were available and suitable, and could be bareboat chartered if required, for the Y Project. The Plaintiff’s complaint is that the tribunal decided to accept the Defendant’s assertions on the GS Vessels, in the absence of any contrary evidence which the Plaintiff could have adduced but for the late notice of the Defendant’s case. It was argued that the Plaintiff had thus been deprived of the opportunity to present its case and to adduce proper evidence to the tribunal. The Plaintiff claims that the outcome in the Arbitration could or might have been different, if the Defendant had properly pleaded its contentions so as to alert the Plaintiff of the same, as it could have put forward pertinent evidence on the possibility of a bareboat charter arrangement, and could have sought discovery on the GS Vessels and the possibility of a bareboat charter arrangement being made.

48.On the pleadings and evidence served in the Arbitration, I am not persuaded that this issue of the GS Vessels had not been raised and that the Plaintiff had been surprised such that it was not given a reasonable opportunity to present its case.

49.The Defendant referred to the Notice of Arbitration dated 11 July 2019, paragraph 20e of which states:

“(G) is a direct competitor of the Company. In around May 2018, the Company and (G) submitted competing bids for (the Y Project), a long term, multi-voyage time charter project. The Y Project does not fall under any of the 4 exemptions under Clause 11.1 (a) (i) of the SHA.”

50.The Statement of Claim (“SOC”) dated 28 November 2019 pleads at paragraph 25 that the Company had at all material times focused on tendering for long term, multi-voyage projects and, at paragraph 26, pleads that the Company operates two marine heavy transport vessels, the A&P Vessels.  The Defendant pleads at paragraph 27 that each vessel is capable of transporting as much as two 10,000-ton modules, and that the Company deploys each vessel in long-term, multi voyage time charter projects.

51.At paragraph 39 of the SOC, the Defendant also pleads that G conducted business which was substantially similar or competes with the business of the Company. Under paragraph 39 (b), the Defendant claims that both the Company’s A&P Vessels and the GPO vessels were suitable for long term, multi-voyage time charter projects, and further pleads in paragraph 39(c) that G submitted competing bids for the Y Project, a long term multi-voyage time charter project. Specifically, the Defendant claims that “the Y Project does not fall under any of the 4 exemptions under Clause 11.1 (a) (i)”.

52.The Plaintiff has highlighted the point that no mention was made in the Defendant’s pleading to the GS Vessels being available on bareboat charter.

53.It was in answer to the claims pleaded in paragraph 39 of the SOC that the Plaintiff served its Statement of Defence and Counterclaim (“Defence”), which was amended on 2 July 2020 to plead at paragraph 60 (h):

“It is denied that (the Company) and (G) submitted competing bids in relation to the Y Project…. Further and in any event, there can be no potential or real commercial conflict between (the Company) and G in the provision of marine transportation services. … Yet further still, at the time of submitting its bid for the Y Project (the Company) did not have a suitable self-owned or bareboat chartered vessel available. But instead sought to make use of (the GS Vessels), for the bid. (The Plaintiff) contends that at the time of the bid for the Y Project, the GS Vessels were not (nor would they have become) self-owned or bareboat chartered vessels of (the Company). Save as aforesaid, paragraph 39 (c) is denied.”

54.The Defendant pointed out that the explanation given by the Plaintiff for the late amendment was that prior to discovery, the Plaintiff had not been aware that the Company was using the GS Vessels to bid for the Y Project.  The Plaintiff itself asserted that it had found out during discovery that the GS Vessels were used by the Company for the bid.

55.The Defendant also highlighted the fact that the Plaintiff had made the positive averment in its Defence, that the GS Vessels were not self-owned or bareboat chartered vessels of the Company.

56.The Reply contains a general non-admission of the allegations made in the Defence. I accept the submissions of the Defendant, that there was an implied joinder of issue on the Defence.  The availability of the GS Vessels for the Y Project, at least as to whether they were self-owned or bareboat chartered vessels of the Company for use, was one of the issues joined on the pleadings.

57.Counsel for the Defendant also referred to the witness statement of Mr A of the Defendant, served on 28 May 2020 (and before the amendments to the Defence).  In this witness statement, Mr A had already referred to the suitability and availability of both the A&P Vessels and the GS Vessels for the Y Project. At paragraph 212 of his statement, Mr A stated that the A&P Vessels “were both suitable and available for the Y Project, as well as the GS Vessels”. Earlier on, at paragraph 211, he had explained that the Company had offered to Chiyoda the A&P Vessels to use for the Y Project, and had also offered to arrange the GS Vessels for such use.  He then explained that he had a very close working relationship with GS, having signed a back-to-back time charter with them, and stated that the GS Vessels had prequalified for the Y Project.

58.At paragraph 219 of his statement, Mr A further made the denial of the Plaintiff’s suggestion, that the Company had no suitable self-owned or bareboat chartered vessels available to bid for the Y Project.  He claimed:

“We had 5 vessels available (the A, P, and 3 GS Vessels). They were in fact suitable, had pre-qualified and were being evaluated for multi-voyage contracts in the later stages of the tender process.”

59.In the light of such evidence, and against the background of the pleadings which had been served in the Arbitration, I cannot agree that the Plaintiff did not have advance notice of the issue of whether it was possible for the GS Vessels to be made available on bareboat charter for the bid on the Y Project.  Mr A had claimed in his witness statement that the GS Vessels were available for the Project, and the Plaintiff had pleaded to this in the Defence. Whether the GS Vessels were indeed “suitable self-owned or bareboat chartered vessels available to bid”, within the meaning of the 3^rd carve-out of clause 11.1 (a) (i), can be argued and Mr A’s evidence can be tested at the hearing of the Arbitration, but it cannot be said that the Plaintiff did not have notice of the case it had to meet. That case of the Defendant was that the GS Vessels were available and could be used for the Y Project, and that the 3^rd carve-out of clause 11.1 (a) (i) did not apply.  This is made clearer when the Plaintiff’s own pleaded case is taken into consideration, as it had itself asserted in the Defence that “the GS Vessels were not (nor would they have become) self-owned or bareboat chartered vessels of (the Company)”. With notice of the issue raised in the pleadings and of Mr A’s evidence, the Plaintiff had ample and fair opportunity to prepare its case to address the issue, which issue had been joined on close of pleadings, and remained a live issue at the hearing.  It was clearly an issue “in the arena”.

60.If there had been any defect or irregularity in the process, to the extent that the Plaintiff had been surprised by the Defendant’s evidence or its unpleaded case, the Defendant rightly pointed out that the Plaintiff could have raised objection to the tribunal, and sought more time to seek discovery or to adduce further evidence, on the basis that the possibility of the GS Vessels being used for the bid had not been pleaded.  It did not do so, either in the course of the evidence when the Plaintiff claims the issue first rose when Mr M was cross-examined and re‑examined, or in its closing submissions, and I agree that the Plaintiff had waived any irregularity, and had deprived the tribunal of the opportunity to remedy the defect now complained of, either by giving time to the Plaintiff, or by excluding the evidence objected to. As the Court of Final Appeal explained in Hebei Import & Export Corp v Polytek Engineering  Co Ltd (1999) 2HKCFAR 111 at pp 137-138, a party to an arbitration who wishes to rely on non-compliance with the rules governing an arbitration should do so promptly and should not proceed with the arbitration, and it is beside the point whether the conduct (of proceeding with the arbitration notwithstanding the irregularity) should be described as estoppel, or a breach of the fundamental principle of good faith. However, in my judgment, the Plaintiff has not been able to show that it had been taken by surprise, and that it had not been given the reasonable opportunity to present its case.

61.As I am not satisfied that the Plaintiff was unable to present its case, the question of whether the outcome of the Arbitration might have been different does not arise for determination. To the extent that the Plaintiff claims that any breach on its part of the SHA was not material if the availability of the GS Vessels was not considered, the tribunal’s reasons for finding the Plaintiff’s breach to be material are set out from paragraph 72 of the 1^st Award. It is clear that the tribunal considered different factors, and specifically pointed out that it did not accept that only the position of the A&P Vessels should be considered.

The construction of vessels “available”

62.The final ground relied upon by the Plaintiff for the setting aside is that it was unable to present its case to the tribunal on the “wholly new interpretation” of the word “available” in the 3^rd carve-out which the tribunal adopted in the 1^st Award.

63.At paragraph 62, the tribunal considered the meaning of the language used in the 3^rd carve-out of clause 11, noting firstly that the language of the introductory wording does not work precisely grammatically, but took it to mean that the Non-compete Clause would not apply “where the Company does not have a suitable self-owned or bareboat chartered vessel available to it for the project”.  No dispute has been raised on this.

64.From paragraph 62c to j, the tribunal observed and found:

“b. It does, however, work if the clause is to be taken as reading ‘However, it is agreed by all Shareholders that this Clause does not apply to the carrying on or being engaged, concerned or interested in carrying on any business by (the Plaintiff) or any Affiliated Company … where the Company does not have a suitable self-owned or bareboat chartered vessel available to bid for the project’;

c. Given the very nature of long term multi voyage Time Charter projects, “available” cannot have been expected to have a particularly limiting meaning;

d. As was apparent during the negotiations for the SHA, the parties contemplated procuring two vessels to carry on business in the future;

e. This accords with a natural usage of the word ‘available’ which derives from a combination of ‘avail’ and ‘able’ so that it can mean being able to avail oneself of something and in a natural usage includes something which can be ‘got bought or found’;

f. The words required that the Company did not have a vessel ‘available to bid’ – i.e. that it could not put in a bid because a vessel could not be ‘got bought or found’;

g. In practical terms availability would likely depend upon possible commercial terms as well as discussions as to when, precisely, vessels were required over a lengthy period. The same would be true of suitability;

h. The requirement for a self-owned or bareboat chartered vessel no doubt required control of the vessel by the Company but, again, would depend upon what could be ‘got, bought or found’;

i. Given the very nature of long term, multi voyage Time Charter Projects, the third carve out would thus be likely to have a limited application;

j. In practical terms, given that the prohibition relates to the business of (the Plaintiff) or one of its affiliated companies, the only safe course for (the Plaintiff) would be to obtain an assurance that the Company did not intend to bid for a long term multi voyage Time Charter Project before carrying on or being engaged, concerned or interested in such a Project.”

65.The Plaintiff argued that the tribunal’s finding, that vessels “available” include vessels which can be “got bought or found” was conjured by the tribunal and was not a meaning contended by either party in the Arbitration. According to Counsel for the Plaintiff, the interpretation of the phrase “suitable self-owned or bareboat chartered vessel available to bid for the project” was only raised by the tribunal briefly in its exchange with the parties’ counsel during oral closing submissions. Counsel emphasized that even during this exchange, the tribunal never suggested that it was minded to interpret “available” to mean “got, bought or found”, and the tribunal never explored nor gave the Plaintiff an opportunity to present its case on the competing meanings of “available”. According to Counsel, such alternative meanings might include a vessel within the ownership or control of the Company which could be used for a bid, a vessel contemplated to imminently come within such ownership or control of the Company which could be so used, or a vessel which could possibly be procured from the market, which would cover a wide range of vessels not within the ownership or control of the Company.

66.Counsel further argued that the tribunal did not analyze the impact of the new interpretation on the alleged breach of clause 11.  The “all-encompassing notion” of “available” would render the 3^rd carve-out to be entirely empty, unless the notion of “materiality” is engaged to counteract the broad notion of breach. 

67.In this regard, whether the tribunal is right or wrong in its interpretation is irrelevant to the application for setting aside. The only point which can be made is that if the Plaintiff had been alerted to the “new interpretation” to be adopted by the tribunal, it would have made submissions on the potential consequences of the interpretation, whether it makes commercial sense on the relationship of the shareholders under the SHA, and whether there was any material breach on the part of the Plaintiff.

68.What is clear is that the availability of the A&P Vessels and the GS Vessels for the bid on the Y Project had been the key issue in dispute in the Arbitration.  The meaning of “available” must have been at the heart of the dispute.  The parties had filed evidence and made detailed submissions on the meaning of the 3^rd carve-out, and the parties and their legal teams must have thoroughly considered the meaning of the words used and should have meticulously prepared their respective cases on the meaning of the words used, and this cannot have excluded the meaning of “available”.

69.“Available” is not a particularly complex term, and I cannot agree that the meaning given to it by the tribunal can be said to be totally novel, and outside the ambit of the submissions made by Counsel on the evidence, such that the parties could have been unprepared for such an interpretation being found by the tribunal, and should fairly have been given the opportunity to make further detailed submissions. The parties had ample opportunity from the commencement of the Arbitration to prepare submissions and evidence on the meaning of “available”, one of the key words in the carve-out clause, and they did take the opportunity to make their full submissions. If the Plaintiff chose not to address the tribunal on the possible meanings of the word “available”, and if the tribunal decided on a meaning which did not suit the Plaintiff’s case, then the Plaintiff can hardly complain, and insist on being given further opportunity to explore the proper meaning with the tribunal.

70.The Plaintiff claimed that there was common ground between the parties in the Arbitration as to the meaning of “available”, and that the tribunal had departed from such common ground. The Defendant denies such common ground, and this is illustrated by the parties’ Submissions served in the Arbitration. At paragraph 63 of the Defendant’s Opening Submissions, Counsel for the Defendant submitted that “so long as (the Company) has the potential of being able to acquire such a vessel suitable for the business in question, the Plaintiff cannot rely on this exemption (in the 3^rd carve-out)”.

71.On the other hand, it was contended in the Plaintiff’s Opening Submissions (at paragraph 126 (3)) that to be available, “the suitable and self-owned or bareboat chartered vessels must actually be available to bid for the project and perform in accordance with the project timeline”.

72.These contentions can hardly be said to be the same, or to share any common ground, given that one focuses on the “potential” and the other on “actual”.  The tribunal considered the natural usage of the word “available” as meaning “being able to avail oneself of something”, which was more in line with the Defendant’s submission, and found that “available” includes something which can be “got bought or found”.

73.The observations made by Popplewell J in Reliance Industries Ltd v Union of India [2018] EWHC 822 apply to this case, when he observed:

“It is always important to keep in mind the distinction between a lack of opportunity to deal with the case and the failure to recognize or take such opportunity. It is commonplace in judicial decisions on points of construction that a judge may fashion his or her reasoning and analysis from the material upon which argument has been addressed without it necessarily being in terms which reflect those fully expressed by the winning party. There is not perceived to be, and is not, anything which is unfair in taking such a course. It is enough if the point is “in play” or “the arena” in the proceedings, even if it is not precisely articulated. To use the language of Tomlinson J, as he then was, in ABB AG v Hochtief Airport [2006] 2 Lloyd’s Rep 1 at 72, a party will usually have had a sufficient opportunity if the “essential building blocks” of the Tribunal’s analysis and reasoning were in play in relation to an issue, even when the argument was not articulated in the way adopted by the tribunal. Ultimately the question which arises under s 33 (a), whether there has been a reasonable opportunity to present or meet a case, is one of fairness and will always be one of fact and degree which is sensitive to the specific circumstances of each individual case. That applies to points of construction as much as to other points in dispute.” (Emphases added)

74.The observations made by His Lordship in Terna Bahrain Holding Company WLL v Bin Kamil Shamsi and Others [2012] EWHC 3283 (Comm) are equally applicable:

“ … whilst s 33 requires a party to be given a reasonable opportunity of addressing his opponent’s case, that does not mean that the tribunal is acting unfairly in deciding the case on the point to which the party raising it does not give any great emphasis, or which is not the subject matter of any great exposition. If the point is raised only briefly, that is in accordance with the ideal of speedy resolution which is an objective of the arbitral procedure (whether or not in a given case the objective is achieved). It is nonetheless so if a host of what turned out to be bad points are also raised and it is on those other points that the party raising the issues concentrates his exposition. Provided that the issue is raised, however briefly, the opposing party has an opportunity to address it at whatever length and in whatever detail he chooses.”

75.On the facts of this case, and bearing in mind the key issues in dispute which were argued, this is not a case of the Plaintiff not having been given the reasonable opportunity to present its case. It is simply a case of the Plaintiff having presented and made submissions on its case, but failing to obtain the outcome it desired. There is no ground to set aside the Awards.

Disposition

76.The Plaintiff’s application to set aside is dismissed. The Plaintiff should pay the costs of and incidental to the application (including any costs reserved), on indemnity basis, with certificate for two Counsel.

Mr Bernard Man SC and Ms Esther Mak, instructed by Lau, Horton & Wise LLP, for the plaintiff

Mr Victor Joffe QC, Mr. Justin Ho and Mr John Leung, instructed by Jones Day, for the defendant