In its judgment of 23 January 2026 in SJ and another v A Limited (“Judgment”), the Hong Kong Court of First Instance (“Court”) set aside an arbitral award ordering payment of USD 481,603,937.80 plus interest (“Award”). The Court held that the arbitral tribunal (“Tribunal”) had failed to address an essential aspect of an estoppel defence: whether the representation alleged was temporally limited rather than one of permanent waiver or abandonment. The decision illustrates how an award may discuss a defence yet still fail to determine the defence actually presented.[1]
Facts
The dispute arose from a proposed initial public offering (“IPO”) that did not come to fruition. A Limited (“Investor”) and B Limited held shares in D Limited (“Company”), the intended listing vehicle. SJ and EL (together, “Founders”) were founders of several entities within the relevant corporate group. In September 2018, the Investor, B Limited, the Founders and other parties entered into a shareholders’ agreement (“SHA”) governing the pre-IPO investment in the Company.[2]
Clause 5.1 of the SHA provided for a repurchase right (“Repurchase Right”), entitling the Investor, subject to the contractual conditions, to require the Founders to purchase some or all of its shares if the Company failed to complete the IPO before the agreed long-stop date. Under Clause 5.3, the Repurchase Right was exercisable by written notice, and the Founders were required to complete the repurchase within three months after delivery of that notice, unless another period was agreed.[3]
Clause 5.6 provided an important protection for the Founders. They would incur no liability to the investors in connection with their obligations under Section 5 of the SHA if, within three months following any investor’s exercise of its repurchase right, they transferred all their direct or indirect equity securities in the Company for no consideration to the investors or their designees, in proportion to the investors’ then respective shareholdings. This protection was relevant to the Founders’ allegations of detrimental reliance.[4]
Under an October 2018 supplementary agreement, the parties restricted the exercise of the Repurchase Right where they had submitted a formal IPO application to the Hong Kong stock exchange before the specified deadline, the exchange had formally accepted it for processing, and the application remained under review. The Company submitted its application in January 2019, but it lapsed in August 2019. A subsequent resubmission was contemplated but never made. In July 2020, the Investor delivered written notice requiring the Founders to repurchase all its shares (“Written Notice”).[5]
The Founders maintained that the Investor’s words and conduct, both before and after the Written Notice, represented that it would not pursue the repurchase remedy at that time and while a mutually acceptable alternative exit remained possible. They relied on the Investor’s support for further listing efforts, merger discussions and other exit options, together with alleged statements about the purpose of the Written Notice. They claimed that reliance on those representations caused them to allow the three-month period under Clause 5.6 to expire, expend substantial time and money pursuing alternatives, and lose an opportunity to profit from a listing. These were the Founders’ allegations. The Court did not determine that the elements of the estoppel defence had been established on the merits.[6]
The Investor commenced arbitration on 7 July 2021. The Tribunal issued the Award on 20 June 2025, finding for the Investor and dismissing the Founders’ counterclaim. The Founders subsequently applied to set aside the Award, while the Investor sought leave to enforce it. The parties agreed that the enforcement application depended on the outcome of the setting-aside application.[7]
Issues
The principal issue was whether the Tribunal had failed to deal fairly, or at all, with the Founders’ estoppel defence by addressing a representation involving permanent surrender of the Repurchase Right rather than the temporally limited representation actually alleged. The Court therefore had to distinguish a failure to determine an essential issue from a decision merely rejecting a party’s arguments on their merits.[8]
The Founders also complained that the Award contained insufficient reasons to explain the rejection of their estoppel defence. The Investor objected that the Founders had not set out this second ground in the originating process. The Founders’ counsel acknowledged that it essentially stood or fell with the first ground, and the Court accordingly focused its analysis on the alleged failure to address the defence.[9]
Holding
The Court applied section 81(1) of the Arbitration Ordinance (Cap 609), which gives effect to Article 34 of the UNCITRAL Model Law. It recognised that a failure to determine an essential issue, commonly described as an infra petita complaint, may engage natural justice and constitute a public-policy ground for setting aside an award. The Court nevertheless emphasised the policy of minimal judicial intervention: awards must be read generously, and courts should remedy only meaningful breaches of natural justice that cause actual prejudice, rather than entertain disguised appeals on the merits.[10]
The Court distinguished an express or implicit rejection of an argument from a failure to consider it. The central inquiry was whether the Award showed that the Tribunal had applied its mind to the critical issues and arguments; the Tribunal did not have to organise its reasons according to the parties’ submissions. The Court also reiterated that an inference that an important issue had been overlooked had to be “clear and virtually inescapable”, while stressing that the parties should not be left to guess whether a central issue had been decided.[11]
Applying those principles, the Court held that the Tribunal had failed to address the scope of the defence actually advanced, which the Court considered pointed to a fundamental misunderstanding of the dispute. It set aside the Award and dismissed the Investor’s enforcement application. It also made costs orders nisi in the Founders’ favour in both proceedings and directed a summary assessment of costs. The Court’s ruling concerned the failure to determine the defence as advanced, not a final determination that the estoppel defence had been proved.[12]
Reasoning
The Court first examined the defence as pleaded and argued. The Founders’ Amended Rejoinder and opening and closing submissions consistently advanced a temporally limited representation. Their case was that the Investor had represented that it would not pursue the repurchase remedy for the time being or while a mutually acceptable alternative exit remained possible. The Amended Rejoinder also pleaded that the Investor was precluded by a suspensory estoppel from commencing arbitration unless and until it remedied the detriment suffered by the Founders. This was materially different from alleging that the Investor had represented that it would permanently give up the Repurchase Right. The distinction was therefore embedded in the case presented to the Tribunal, rather than developed for the first time in the setting-aside proceedings.[13]
The Award’s formulation of the estoppel issue initially captured the relevant question: whether the Investor had represented that it did not intend to exercise the Repurchase Right at that time but preferred to continue pursuing other exit options. The Tribunal subsequently reframed the question in terms of enforcement, rather than exercise, because it considered that the Investor had validly exercised the Repurchase Right by issuing the Written Notice. It then reasoned that the Investor could delay enforcement and pursue alternative solutions without losing its right to commence arbitration to enforce the Repurchase Right. The Court’s concern was that the ensuing analysis addressed permanent loss of the right rather than the limited representation alleged by the Founders.[14]
Importantly, the Tribunal had not simply omitted all discussion of estoppel. As recorded in the Judgment, it considered conflicting evidence about the parties’ communications and rejected the alleged representations, including any representation that the Investor did not intend to exercise the Repurchase Right at the time of the Written Notice or at any other time. It viewed the Investor as acting pragmatically by helping the Founders explore alternative exits, given the difficulty of raising the funds necessary for a repurchase. It also reasoned that the Investor had no commercial reason to give up the Repurchase Right without assurance that another exit would materialise. Having found no clear and unequivocal representation, the Tribunal did not consider the remaining elements of the estoppel defence in detail.[15]
The Court nevertheless concluded that the reasoning had addressed a materially different proposition. In particular, the Court observed that the Tribunal’s reasoning was tied to Clause 12.7 of the SHA, under which delay in exercising a right did not operate as a waiver. The Tribunal’s central findings and subsequent reasoning repeatedly referred to waiver, abandonment or giving up the Repurchase Right. Its treatment of the possible Singapore listing likewise appeared to concern permanent surrender, rather than a representation limited to the period before that proposed listing failed. Read together, these features indicated that the Tribunal had considered a materially different representation from the one on which the Founders relied.[16]
The Investor also relied on authorities addressing the suspensory, rather than extinctive, effect of estoppel and the possibility of resiling from a promise on reasonable notice. The Court rejected that reliance as an answer to the Founders’ complaint. It explained that the argument confused the legal effect of an estoppel with the original scope of the representation alleged. The issue was not simply whether an established estoppel would suspend or extinguish a right. It was whether the Tribunal had considered the particular, temporally limited representation that formed the basis of the defence.[17]
The Investor further argued that, even if the Tribunal had addressed a representation of permanent surrender, its findings necessarily disposed of the allegation of a temporally limited representation. The Court rejected that inference in the circumstances of this case. It explained that a representation of permanent surrender had more serious implications than a temporally limited representation. A finding that the Investor had not represented that it would permanently give up the Repurchase Right did not necessarily establish that it had made no representation postponing enforcement. Treating the former finding as automatically encompassing the latter overlooked the distinction the Tribunal needed to address.[18]
Finally, the Court rejected the Investor’s contention that particular passages of the Award demonstrated that the point had, in fact, been considered. For the reasons identified in its examination of the Award, the Court remained satisfied that the defence’s essential scope had not been addressed. The fact that the Award discussed estoppel did not resolve that deficiency.[19]
Conclusion
The Judgment illustrates an important limit to judicial deference in Hong Kong arbitration. A tribunal need not accept a party’s arguments or reproduce its submissions, but it must address the essential case actually advanced. Correctly identifying an issue at the outset, or discussing the relevant legal doctrine in general terms, does not necessarily suffice where the reasoning answers a materially different question.[20]
The lesson is particularly relevant where a defence turns on the scope, duration or conditions of a representation. Parties should articulate those features precisely, and tribunals should distinguish the representation alleged from the legal consequences that might follow if it is established. The Judgment does not establish that pursuing alternative exit arrangements automatically suspends repurchase rights. Its significance is procedural: the Court set aside the Award because the Tribunal had not determined an essential defence in the form presented, not because the Court itself finally resolved that defence in the Founders’ favour.[21]
[1] SJ and another v A Limited [2026] HKCFI 373, ¶¶ 15, 35-37, 44-47.
[2] Id. ¶¶ 5-9.
[3] Id. ¶ 10(1)-(2).
[4] Id. ¶¶ 10(3), 34(1).
[5] Id. ¶¶ 11-14.
[6] Id. ¶¶ 28, 31-34, 46-47.
[7] Id. ¶¶ 1-2, 15.
[8] Id. ¶¶ 18, 22(4), 27-30, 35.
[9] Id. ¶¶ 18-19.
[10] Id. ¶¶ 21-22.
[11] Id. ¶¶ 22(4)-(5), 23.
[12] Id. ¶¶ 37, 44-47.
[13] Id. ¶¶ 28-30, 41-42.
[14] Id. ¶¶ 26, 35, 36(2)-(3), 37.
[15] Id. ¶ 36(4)-(5).
[16] Id. ¶ 37.
[17] Id. ¶¶ 39-40.
[18] Id. ¶¶ 43-44.
[19] Id. ¶¶ 36-37, 45-46.
[20] Id. ¶¶ 22(4)-(5), 35-37, 44-46.
[21] Id. ¶¶ 40, 44, 46-47.