BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another

• Jurisdiction: Singapore
• Court: International Commercial Court (Singapore)
• Judge: Quentin Loh J,Vivian Ramsey IJ,Anselmo Reyes IJ
• Judgment Date: 26 July 2017
• Neutral Citation: [2017] SGHC(I) 6
• Citation: [2017] SGHC(I) 6
• Docket Number: Suit No 1 of 2015
• Subject Matter: Contract,Breach,Damages,Remedies
• Defendant Counsel: Davinder Singh SC, Tony Yeo, Jaikanth Shankar, Chan Yong Wei, Lydia Ni, Harsharan Kaur and Jerrie Tan (Drew & Napier LLC)
• Published date: 31 August 2018
• Plaintiff Counsel: Francis Xavier SC, Jeremy Gan, Alina Chia, Tng Sheng Rong, Ang Tze Phern, Tee Su Mien and Vinna Yip (Rajah & Tann LLP)
• Date: 26 July 2017
• Hearing Date: 04 January 2017,05 January 2017,12 January 2017,20 April 2017,06 January 2017,13 January 2017

Quentin Loh J, Vivian Ramsey IJ and Anselmo Reyes IJ:

This is our judgment and determination of the issues in the second tranche (“Tranche 2”) of these proceedings. To recapitulate, these disputes arise out of a joint venture which sought to exploit a technology developed by Australian parties for the upgrading of sub-bituminous coal from mines in Tabang, East Kalimantan, owned by Indonesian parties, into coal briquettes with a higher calorific value and lower moisture content. The terms of the joint venture were set out in the JV Deed dated 7 June 2006. However, during the course of the joint venture, the parties subsequently entered into a number of ancillary agreements, memoranda, side letters and other documents recording their various agreements on the many issues that cropped up.

Introduction

The background and facts surrounding these disputes have been set out in our earlier judgment dated 12 May 2016 for the first tranche of this trial (“Tranche 1”): see BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2016] 4 SLR 1; [2016] 5 LRC 186 (“the First Judgment”) at [1] – [85]. We will not repeat the same and will only refer to those facts insofar as it is necessary to do so to answer the issues raised in Tranche 2. Unless otherwise specified, we adopt the same abbreviations used in the First Judgment.

To recapitulate, in the First Judgment, we determined issues which fell into three categories, viz, funding issues, coal supply issues and counterclaim issues (see the First Judgment at [86]). We held, inter alia, as follows: in respect of the funding issues, we held that BR was not obliged to fund the joint venture between November 2011 and March 2012 on two grounds (see the First Judgment at [92] – [131]). First, cl 4 of the Funding MOU did not override cll 7.1 and 8 of the JV Deed. Secondly, the good faith obligation in cl 17.3 of the JV Deed did not constrain BR to approve any and all additional expenditure assessed by BCBCS. We also held that BCBCS had not undertaken to fund the joint venture until commercial production (see the First Judgment at [137] – [146]); with regard to the coal supply issues, we held that the arrangements under the April 2011 Side Letter read with the 2010 CSAs were neither illegal nor tainted with illegality (see the First Judgment at [172] – [228]); on the counterclaim issues, we held that BCBCS was not under an implied obligation to use the reasonable skill and care expected of a competent designer, builder and operator of coal preparation and briquetting plants in providing technical assistance to KSC (see the First Judgment at [263] – [271]). For completeness, we also held that there was no implied term of the JV Deed and/or the Funding MOU that BCBCS was under a contractual obligation to procure that KSC produce 1 MTPA of upgraded coal briquettes within a reasonable time (see the First Judgment at [272] – [287]).

We also held that we were not able to answer the other coal supply issue, Issue 4, which was formulated as follows (see [155] of the First Judgment):

… whether BR was under an obligation to supply and/or assist in procuring coal to be supplied to KSC on the basis set out in the JV Deed, PLFA and/or the April 2011 Side Letter, in around the period between early November 2011 to 2 March 2012.

We left this question open for Tranche 2 because there was “insufficient evidence … before us to answer the question of what coal KSC required in early November 2011 to 2 March 2012”: see [171] of the First Judgment. We stated that “what stage the commissioning had reached by early November 2011 and whether there was sufficient coal for the commissioning process during the relevant period … cannot be answered on the inadequate evidence placed before us”, and reserved Issue 4 for Tranche 2 where the necessary facts and evidence could be fully adduced and explored.

For Tranche 2, the parties formulated a further list of eleven issues for our determination. Again, the issues fall within three broad categories:¹ coal supply issues (Issues 1 to 4); repudiation issues (Issues 5 to 8); and causation and loss issues (Issues 9 to 11). Notably, the parties were unable to agree on all the issues to be determined in Tranche 2. They agreed on the framing of Issues 2, 4, 5 to 8, 10 and 11, but were unable to agree on the wording of Issues 1, 3 and 9. In response, we informed the parties that we would hear Tranche 2 on the basis of the list of agreed and non-agreed issues set out in the Plaintiffs’ solicitors’ letter to the Court dated 18 November 2016. On those issues upon which the parties could not reach agreement, we would decide matters based on the pleaded issues, with each party being able to argue as to what the pleaded issues were.² We have set out these agreed and non-agreed issues in our judgment below.

In this tranche, the parties were, in essence, focused on: Issue 4 from Tranche 1 (Issues 1 to 3 of Tranche 2); the alleged breaches by BR of obligations in relation to the supply of coal to KSC (“BR’s coal supply obligations”) (Issue 4 of Tranche 2); whether, in the events that occurred at the end of 2011 and early 2012, either party was in repudiatory breach of its obligations; and if so, whether the other party had accepted the other’s repudiatory breach (if any) and put an end to the joint venture (Issues 5 to 8 of Tranche 2); and whether, even if BR was in repudiatory breach of its coal supply obligations, such breach could have caused BCBCS loss, given our conclusion in Tranche 1 that BR was not obliged to fund KSC between November 2011 and 2 March 2012 (Issues 9 to 11 of Tranche 2). The thrust of the Defendants’ case on this point is as follows: BCBCS was not entitled under the JV Deed to unilaterally fund KSC without BR’s approval; accordingly, KSC was simply not viable, since it was devoid of funding from BR and unable to receive funding from BCBCS due to BR’s objections to such funding; even if coal had been supplied, KSC would not have been able to do anything with the coal (much less upgrade the same into coal briquettes) without funding; thus, even if BR had breached its coal supply obligations, this could not have caused loss to BCBCS. On these premises, it follows that, even if BR had breached its coal supply obligations, the damages for such breach would only be nominal. Thus, the Defendants argue that there is no need for a third tranche of these proceedings (“Tranche 3”) to determine the quantum of any loss or damage suffered by BCBCS due to BR’s alleged breach.

During a Case Management Conference (“CMC”) before Tranche 2, we informed the parties that reference could be made to evidence from Tranche 1 (to avert the need to recall witnesses to repeat their evidence).³ In this judgment, we shall refer to evidence from Tranche 1 where it is relevant.

We heard Tranche 2 on 4–6 and 12–13 January 2017. Thereafter, the parties submitted written closing submissions and reply submissions. We then heard oral closing submissions from the parties on 20 April 2017.

The witnesses

The following witnesses testified for the Plaintiffs in this tranche: Mr Brian Flannery (“Mr Flannery”), the Managing Director and the Chief Executive Officer (“the CEO”) of WEC, who is also a director of the Plaintiffs, and who was a former director of KSC;⁴ Ms Neale, the Business Development Counsel of WEC (see also [83(b)] of the First Judgment);⁵ and Mr John Reilly (“Mr Reilly”), who was KSC’s Construction Superintendent from 19 July 2007 to August 2009 and KSC’s Site Operations Manager from September 2009 to December 2011, and who has more than 35 years of experience in the coal industry.⁶ In addition, Mr David Friedlander filed an affidavit for the Plaintiffs which was admitted into the evidence.⁷ But the Defendants did not cross-examine Mr Friedlander; and, upon their withdrawal of the argument that BCBCS had repudiated the JV Deed by permitting WEC to make public announcements relating to the same (see [146] below), his evidence became superfluous. The Plaintiffs had also intended to call Mr Toh Ching Wah (“Mr Toh”), but later decided, in view of developments during the trial, not to rely on his evidence (see [53] below).⁸

The following witnesses testified for the Defendants in this tranche: Mr Neil, a Director and Chief Development Officer of BR and a director of BI (see also [84(a)] of the First Judgment);⁹ Mr McLeod, a Director and the Chief Financial Officer (“the CFO”) of BR and a director of BI (see also [84(b)] of the First Judgment);¹⁰ Mr Lim, a Director and the Chief Operating Officer (“the COO”) of BR and a director of BI (see also [84(d)] of the First Judgment); and Mr John Kipling Alderman (“Mr Alderman”), the President of Advanced Coal Technology (a company which provides coal quality consulting and process design services), who has 41 years of experience in the coal industry.¹¹

The following representatives of the Plaintiffs and the Defendants also played leading roles in the key events detailed at [13] – [65] below: Mr Duncan, the current chairman of WEC and a director of the Plaintiffs (see also [83(a)] of the First Judgment);¹² Mr Maras, the CFO of WEC (see also [83(c)] of the First Judgment);¹³ Dato Low Tuck Kwong (“Dato Low”), the chairman of BI; and Mr Chin, the President Director and the CEO of BR and a director of BI (see also [84(c)] of the First Judgment).¹⁴

The key facts

We now set out the key facts in Tranche 2. Insofar as these facts are disputed, the following paragraphs constitute our findings of fact.

Events leading up to the November 2011 Board Meeting

It will be seen from the First Judgment that a major bone of contention between the parties was the funding and escalating costs to complete the Tabang Plant. Despite a Funding MOU dated 16 March 2009, numerous emails continued to be exchanged between the parties on this and other...