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

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 10 February 2023
• Neutral Citation: [2023] SGCA(I) 1
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 10 of 2022
• Hearing Date: 17 October 2022
• Citation: [2023] SGCA(I) 1
• Year: 2023
• Plaintiff Counsel: Francis Xavier SC, Chia Xin Ran Alina, Gani Hui Ying Tracy and Tay Bok Chong Alvin (Rajah & Tann Singapore LLP)
• Defendant Counsel: Davinder Singh s/o Amar Singh SC, Jaikanth Shankar, Tan Ruo Yu, Amarpall Singh and Ayana Ki (Davinder Singh Chambers LLC)
• Subject Matter: Contract,Remedies,Damages
• Published date: 14 February 2023

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

This appeal is against the decision of the Singapore International Commercial Court (the “SICC”) in BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2022] SGHC(I) 2 (the “Judgment”). The underlying disputes concern a joint venture between the parties that ended acrimoniously. In earlier tranches of the SICC proceedings, the respondents in the present appeal had been found to have breached the contract between the parties. The present appeal arose out of the third tranche of proceedings before the SICC, which concerned the assessment of loss and damage. The SICC determined that, notwithstanding the first respondent’s breaches of contract, the appellants had not proved that they were entitled to receive any damages, or other remedy, and if upheld, this would bring this suit to an ultimately unproductive end for the appellants. The present appeal is concerned with this issue only.

Background

Because the litigation to this point has been long-running and somewhat complex, it is useful to first outline the case and its procedural history.

The first appellant, BCBC Singapore Pte Ltd (“BCBCS”), a company incorporated in Singapore, is an associate of the second appellant, Binderless Coal Briquetting Company Pty Limited (“BCBC”), which is a company incorporated in Australia. BCBC is the exclusive licensee of a patented technology capable of processing low-value sub-bituminous coal to yield a higher-value coal suitable for commercial sale. The process, which has given the appellants their names, is known as “Binderless Coal Briquetting” (the “BCB Process”). Both appellants are indirectly wholly-owned subsidiaries of White Energy Company Limited (“WEC”), an energy and technology company listed on the Australian Securities Exchange. The first respondent, PT Bayan Resources TBK (“BR”), is a coal mining company listed on the Indonesian Stock Exchange; its subsidiaries operate sub-bituminous coal mines in Tabang, Indonesia. The second respondent, Bayan International Pte Ltd (“BI”), is its associate incorporated in Singapore.

In May 2005, the respondents learnt about the BCB Process and entered into discussions with BCBC regarding a possible joint venture to construct and commission a plant in Tabang (the “Tabang Plant”). It was contemplated that the Tabang Plant would process sub-bituminous coal supplied by BR’s subsidiaries, using the BCB Process to upgrade such coal. The resulting higher-value coal would then be sold at a higher profit. Eventually, a joint venture deed (the “JV Deed”) was executed on 7 June 2006 between BCBC and BI. The corporate vehicle used for the venture was PT Kaltim Supacoal (“KSC”), an Indonesian company in which BCBCS held a 51% stake, and BI held the remaining 49%. In 2008, BI sold its 49% share to BR, and, in 2009, by a deed of novation, BCBC and BI were replaced by BCBCS and BR as the parties to the JV Deed. This had the effect of aligning the named parties to the JV Deed and the shareholders of KSC.

In the meantime, the construction of the Tabang Plant had commenced. However, the venture ran into issues that increased its cost. To sustain KSC and the joint venture, BCBCS and BR entered into three sets of agreements at various times between April 2007 and December 2010 to extend loans to KSC. These agreements, especially those relating to BR’s loans to KSC, are central to this appeal.

The first two sets were shareholder loan agreements that KSC entered into with BCBCS and BR separately. We will refer to the loan agreements between BCBCS and KSC as the “1SLA (BCBCS)”¹ and the “2SLA (BCBCS)”;² and those between BR and KSC as the “1SLA (BR)”³ and “2SLA (BR)”.⁴ The first pair of agreements (1SLA (BCBCS) and 1SLA (BR)) are dated 16 April 2007 and the second pair of agreements (2SLA (BCBCS) and 2SLA (BR)) are dated 25 November 2008. The third is referred to as the “priority loan funding agreement” (“PLFA”). It was executed by KSC, BCBCS and BR on 17 December 2010, but backdated to 22 April 2010.⁵

By the 1SLA (BCBCS) and 1SLA (BR), BCBCS and BR each agreed to loan KSC up to US$25m.⁶ Hence, pursuant to this pair of agreements, a total of US$50m was made available to KSC, which KSC ultimately fully utilised (see the Judgment at [18(a)]).⁷ This loan agreement did not have any addenda. These agreements had a particular repayment structure under which KSC’s repayment obligations were to commence one year from the date on which the Tabang Plant commenced “Commercial Production”.⁸ Thereafter, KSC was to make annual repayments and complete all repayments within five years from the date on which the Tabang Plant commenced “Commercial Production”. Before us, there is no dispute that the Tabang Plant may be taken to have commenced commercial production at the end of June 2012.⁹ Thus, it is agreed that KSC’s first repayment obligation to BCBCS and BR would have been due on 30 June 2013 and its final repayment obligation, on 30 June 2017 (also see the Judgment at [146]).

By the 2SLA (BR), BR agreed to loan KSC a further sum of up to US$15m. This loan agreement had four addenda. The first was effected on 11 December 2008 to increase the loan to up to US$25m. The second, third and fourth addenda were executed on 30 June 2009, 24 December 2009 and 3 January 2011 respectively, and these postponed the repayment date of the loan, which was originally the earlier of 31 December 2009 (unless extended) or on written demand by BR, to 31 December 2010, 2011, and finally 2012, on each instance, on the earlier of the applicable date (unless extended) or on written demand by BR.¹⁰ The terms of the 2SLA (BCBCS) were essentially identical with the 2SLA (BR) to begin with. However, there were two addenda to the 2SLA (BCBCS). The first, dated 11 December 2008, increased the loan to up to US$25m.¹¹ The second, dated 30 June 2009, further increased this to up to US$35m and also extended the date by which BCBCS was to be repaid from 31 December 2009 to the earlier of 31 December 2011 (unless extended) or on written demand by BCBCS.¹² No written demand was made by BCBCS prior to 31 December 2011. For completeness, we also note that BCBCS extended US$26,591,206.88¹³ to KSC under the 2SLA (BCBCS) (see the Judgment at [18(b)]). BR did not advance the full US$25m made available to KSC under the 2SLA (BR), but rather advanced the sum of US$14,600,678.¹⁴

Lastly, by the PLFA, BCBCS agreed to make available to KSC a loan facility of US$20m (the “Priority Facility”).¹⁵ KSC was to repay the sum drawn down on this facility by 31 December 2011 unless this was extended.¹⁶ BR did not agree to loan funds to KSC under the PLFA; instead, it undertook to ensure that its subsidiaries would supply sub-bituminous coal to KSC in accordance with other supply agreements already in place, but on terms that would only require KSC to pay US$8 per tonne of such coal on delivery.¹⁷ KSC was then required to settle the balance (being the market price per tonne of coal less US$8 per tonne of coal, applied to the total volume of coal supplied) by 31 December 2011 (the “Coal Advance”). On 29 June 2011, KSC, BCBCS and BR executed an addendum by which it was agreed that the sum which BCBCS would make available to KSC under the Priority Facility would be increased to US$40m. The addendum also postponed KSC’s payment obligations in respect of both the Priority Facility as well as the Coal Advance to 30 June 2012, unless further extended.¹⁸ Article 11.1 of the PLFA suggests that such extensions were subject to the mutual agreement of BCBCS and BR.¹⁹

In summary, based on the terms of the three sets of agreements set out above, the chronological order in which KSC was obliged to settle its debts with BCBCS and BR was as follows: By 31 December 2011, KSC was to repay BCBCS the sums it borrowed under the 2SLA (BCBCS). By 30 June 2012, KSC was to repay BCBCS the sums it borrowed under the PLFA’s Priority Facility and pay BR the balance it owed for the Coal Advance. By 31 December 2012, KSC was to repay BR the sums it borrowed under the 2SLA (BR). On 30 June 2013, KSC was to make its first annual repayment under both the 1SLA (BCBCS) and 1SLA (BR) and it needed to complete these repayments by 30 June 2017.

However, on 17 December 2010, which was the day on which KSC, BCBCS and BR executed the PLFA (see [6] above), the three parties also agreed to vary the order in which KSC was to settle these debts. This agreement was set out in a letter backdated to 3 December 2010 (the “Subordination Letter”) (see the Judgment at [19]), which provided as follows:²⁰

KSC, BCBCS and BR hereby agree that the [loan agreements] will be repaid in the following order: 1. The [PLFA] will be repaid by KSC first, ahead of all other [loan agreements] but concurrently with the Coal Advance, pursuant to the terms of such agreement. 2. Following full repayment of the [PLFA], KSC will then repay the [1SLA (BCBCS)] and the [1SLA (BR)], each loan to rank equally to the other and each will be repaid in equal proportions. 3. Following full repayment of the [loan agreements] referred to in (1) and (2) above, KSC will then repay the [2SLA (BCBCS)] and the [2SLA (BR)], each loan to rank equally to the other and will be repaid by KSC in proportion to that party’s shareholding interest in KSC.

The above repayment schedule will not affect the repayment terms of any financing arrangement entered into between KSC and a third party financier.

The effect of the Subordination Letter has a bearing on this appeal. The parties dispute how – if at all – these terms affect BCBCS’s and BR’s rights to enforce repayment by KSC. We return to this at [49] below.

In the event, however, the loans advanced to KSC did not save the joint venture. Following various delays and substantial cost overruns with which we need not be concerned for the purposes of this...