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

• Court: International Commercial Court (Singapore)
• Judge: Quentin Loh JAD
• Judgment Date: 07 February 2022
• Neutral Citation: [2022] SGHC(I) 2
• Citation: [2022] SGHC(I) 2
• Hearing Date: 09 January 2021,30 September 2020,23 September 2020,22 September 2020,25 September 2020,21 September 2020,29 September 2020,28 September 2020,24 September 2020
• Published date: 12 February 2022
• Docket Number: Suit No 1 of 2015
• Plaintiff Counsel: Francis Xavier s/o Subramaniam Xavier Augustine SC, Disa Sim, Chia Xin Ran Alina, Tng Sheng Rong (Tang Shengrong), Ang Tze Phern, Edwin Tan, Foo Xian Fong, Timothy Chan, Tracy Gani and Zheng Yirong (Rajah & Tann Singapore LLP)
• Defendant Counsel: Davinder Singh s/o Amar Singh SC, Jaikanth Shankar, Tan Ruo Yu, Tan Mao Lin, Irina Golovkovskaya, Darren Low, Rajvinder Singh Chahal and Amarpall Singh (Davinder Singh Chambers LLC)
• Subject Matter: Contract,Remedies,Damages

Quentin Loh JAD, Vivian Ramsey IJ and Anselmo Reyes IJ: Introduction

This is the third and final tranche (“Tranche 3”) of these proceedings which arise from a joint venture between Australian and Indonesian companies to exploit a new technology to upgrade coal for commercial sale that ended in a series of disputes. This judgment deals with the issues of loss and damage claimed by the plaintiffs.

Background facts

The full facts of this case have been set out in BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2016] 4 SLR 1 (“First Judgment”) and BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2017] 5 SLR 77 (“Second Judgment”). For completeness, there is a third judgment on a discrete issue – whether the first plaintiff, BCBCS, could fund the joint venture vehicle, KSC, on its own up to the point when the commissioning and testing of the Tabang Plant was completed or until June 2012 (see [13] below). The Tabang Plant was the coal processing plant which the parties set up in Tabang, Indonesia pursuant to their joint venture.

We will set out only those facts that are relevant to the issues raised in Tranche 3 and reference should be made to the three earlier judgments for the more complete facts. Unless otherwise specified, we adopt the abbreviations used in the Second Judgment.

The parties

The second plaintiff, BCBC, holds the exclusive worldwide licence of a technology for the upgrading of sub-bituminous coal known as the Binderless Coal Briquetting Process or the BCB Process. The first plaintiff, BCBCS, is a company incorporated in Singapore. BCBC and BCBCS are indirect wholly-owned subsidiaries of the second defendant by counterclaim, White Energy Company Ltd, or WEC, a public-listed company incorporated in Australia.

The first defendant, BR, is a public-listed company incorporated in Indonesia that owns subsidiaries which operate sub-bituminous coal mines in Tabang, Indonesia. Of these subsidiaries, only Bara and FSP are material for present purposes. The second defendant, BI, is a company incorporated in Singapore and is an associated company of BR.

The JV Deed

In early May 2005, the Defendants learnt about the BCB Process from the sharing by Mr Clark, the then-general manager of BCBC, at a conference in Lexington, Kentucky. Further discussions followed, and eventually the JV Deed was executed between BCBC and BI on 7 June 2006.

Pursuant to the JV Deed, the parties agreed to construct and commission the Tabang Plant to exploit the BCB Process to upgrade sub-bituminous coal produced by the Defendants for commercial sale. The joint venture company, KSC, was incorporated in Indonesia in January 2007, with BCBCS and BI holding respectively 51% and 49% of its issued shares. In October 2008, BI sold its shares in KSC to BR, as part of BR’s corporate restructuring. By way of a Deed of Novation executed in 2009, BCBCS and BR were substituted for BCBC and BI respectively as the parties to the JV Deed. The Deed of Novation therefore aligned the identities of the parties to the JV Deed with the identities of the shareholders in KSC (namely, BCBCS and BR, holding respectively 51% and 49% of its shares).

Apart from the JV Deed, the parties also entered into a number of ancillary documents that amended the JV Deed and, more importantly, recorded their agreement on various issues that emerged in the course of the joint venture (see also the First Judgment at [22]‒[66]). These documents included: The Funding MOU: This document was dated 16 March 2009 and detailed the parties’ respective obligations to fund KSC. The Expansion MOU: This document was also dated 16 March 2009 and concerned the future expansion of the joint venture. The Priority Loan Funding Agreement or PLFA: This agreement was signed by KSC, BR and BCBCS on 17 December 2010 but was backdated to 22 April 2010. Under this agreement, BCBCS would advance a revolving working capital facility of up to US$20m (“the Priority Facility”) to KSC. BR would, in turn, supply coal (through Bara and FSP) to KSC at the market price but would require payment of only US$8 per tonne upon delivery, with the balance being looked after by BR (“the Coal Advance”). By way of an addendum, which was stated to be “an inseparable part of the [PLFA]”, the Priority Facility was increased to US$40m (“the Addendum”). The Priority Facility was eventually exhausted in August 2011 (see First Judgment at [134]). The 2010 CSAs: These were coal supply agreements entered into between KSC and BR’s coal mining subsidiaries – namely, Bara and FSP – between March and June 2011. They superseded the earlier coal supply agreement which KSC had entered into with Bara in 2008, the 2008 CSA (see First Judgment at [32(a)]). Under the 2010 CSAs, Bara and FSP agreed to supply coal to KSC at the benchmark price provided for under Indonesian law (the “HBA Price”). The HBA Price was the result of a piece of legislation passed by the Indonesian government, Regulation 17 of 2010 on Procedures to Determine the Benchmark Price for the Sale of Minerals and Coals, which put in place benchmark prices for the sale of minerals and coal in Indonesia (the “HBA Regulations”). However, as a result of the PLFA, KSC was only required to pay US$8 per tonne of coal upfront (see [8(c)] above). The 2010 CSAs were backdated to 1 October 2010, the date on which the HBA Regulations came into force (see Second Judgment at [16]). The April 2011 Side Letter: This side letter was signed by BCBC, BR, Bara and KSC on 5 April 2011. The parties thereby agreed that Bara and KSC had entered into the 2010 CSAs to comply with the Indonesian legislative requirements in connection with the calculation of the price of coal to be supplied by Bara to KSC. Importantly, the April 2011 Side Letter provided for a “Payments Reconciliation” mechanism (“PRM”). The PRM was an arrangement among the parties to realign their financial contributions to KSC and to settle how profits from the joint venture would be shared. The inclusion of the PRM in the April 2011 Side Letter was prompted by changes in coal prices arising from the HBA Regulations.

The previous judgments

The parties’ relationship subsequently deteriorated into a series of disputes, culminating in the commencement of these proceedings by the Plaintiffs against the Defendants. Tranche 1 concerned the scope and content of the parties’ contractual obligations in relation to the joint venture. We held the following: BR was not obliged to fund the Project between November 2011 and March 2012 because: (i) cl 4 of the Funding MOU did not override cll 7.1 and 8 of the JV Deed (see First Judgment at [104]‒[125]); and (ii) the good faith obligation in cl 17.3 of the JV Deed did not constrain BR to approve any and all expenditure that BCBCS had assessed (see First Judgment at [126]‒[131]). BCBCS had not undertaken to fund the joint venture until the Tabang Plant achieved commercial production (see First Judgment at [137]‒[146]). BR was not obliged to consent to KSC obtaining a further advance of US$3.033m from Standard Chartered Bank to repay the temporary loan it had received from BCBCS (see First Judgment at [147]‒[153]). 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 First Judgment at [239]‒[271]). There was no implied term in the JV Deed or the Funding MOU that BCBCS was contractually obliged to procure that KSC produce 1 million metric tonnes per annum (“MTPA”) of upgraded coal briquettes within a reasonable period of time (see First Judgment at [283]‒[287]). In the light of our finding that BR was not obliged to fund KSC between November 2011 and March 2012 (see [9(a)] above), the issue of whether the JV Deed or the Funding MOU contained any such implied term was, strictly speaking, moot (see First Judgment at [273]).

However, we were not able to determine whether, based on the JV Deed, the PLFA, or the April 2011 Side Letter, BR was under an obligation to supply or assist in procuring the supply of coal to KSC in around the period between early November 2011 and 2 March 2012. This was because the evidence adduced in Tranche 1 was insufficient to enable us to answer the question of what coal KSC had required during that period of time (see First Judgment at [155]‒[171]). This issue was accordingly left for determination in Tranche 2. There was no appeal against our decision in Tranche 1.

In Tranche 2, we determined issues relating to BR’s coal supply obligations and the alleged breaches of the parties’ contractual obligations under the joint venture. In respect of BR’s coal supply obligations, we held the following: BR had: (i) a prima facie obligation under Art. 7.1 of the PLFA, which expired on 31 December 2011, to ensure that Bara and FSP supplied coal to KSC in accordance with cl 3.9 of the 2010 CSAs; and (ii) a prima facie obligation under cl 3.8(b)(iii), until the termination of the JV Deed, to ensure the same (see Second Judgment at [68]–[77]). We refer to these two obligations collectively as the “Coal Supply Obligations”. BR’s Coal Supply Obligations remained in place even if there was no funding for KSC (see Second Judgment at [107]‒[117]). BR’s Coal Supply Obligations did not cease merely because there was a lack of funding for KSC or because the Tabang Plant was at a particular stage of commissioning, was non-operational or had been placed into care and maintenance (see Second Judgment at [118]‒[127]).

Each side accused the other of repudiatory breaches. In essence, we found that BCBCS had not acted in breach of the JV Deed (see Second Judgment at [148]–[177]). On the other hand, we held that BR had breached its Coal Supply Obligations by: (a) instructing FSP and Bara to cease their supply of coal to...