International Coal Pte Ltd v Kristle Trading Ltd and Another and Another Suit

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 22 October 2008
• Neutral Citation: [2008] SGHC 182
• Date: 22 October 2008
• Subject Matter: Confidentiality,Assignor of coal-mining rights entering into arbitration proceedings with assignee over disputes,Breach,Equity,Guarantor raising issues similar to issues raised in arbitration proceedings between assignor and assignee,Estoppel,Whether guarantor estopped from raising issues,Whether guarantor privy of assignee,Arbitration,Whether assignor breached its duty of confidentiality through disclosure in various letters
• Docket Number: Suits Nos 11 and 12 of 2005
• Published date: 30 October 2008
• Defendant Counsel: Samuel Chacko with Angeline Soh Ean Leng (Legis Point LLC)
• Court: High Court (Singapore)
• Plaintiff Counsel: Yeo Soo Mong Tony with Koh Wei Ser Joanna and Chung Su-Ling Lauren (Drew & Napier LLC)

22 October 2008 Judgment reserved.

Lai Siu Chiu J:

1 These consolidated suits involved disputes relating to a number of agreements entered into for coal-mining rights in Kalimantan, Indonesia. One suit concerns the scope of the principle of privacy in commercial arbitration while the other suit touches on the applicability of issue estoppel to arbitration proceedings and court proceedings between the same parties.

2 International Coal Pte Ltd (“ICP”) is a Singapore company incorporated by one Low Tuck Kwong (“Low”), who was its managing-director, for the business of coal-mining and coal mine development. Kristle Trading Limited (“Kristle”) is a company incorporated in Hong Kong and is the first defendant in Suit No. 11 of 2005 (“the first suit”). The principal shareholder and president of Kristle is one Kazushi Toyoshige (“the second defendant”) who is the second defendant in the first suit. Kristle’s other shareholder is one Donald Cameron.

3 Low and ICP are the second and third plaintiffs respectively in Suit No. 12 of 2005 (“the second suit”) taken out against Kristle and the second defendant. An Indonesian company called PT Jaya Sumplies Indonesia (“PTJS”) is the first plaintiff in the second suit. Low, ICP and PTJS will hereinafter be referred to collectively as “the plaintiffs” while Kristle and the second defendant will be referred to collectively as “the defendants”.

4 By an agreement dated 1 November 1995 (“the second novation agreement”), ICP was assigned, for a consideration of US$4.5m, the coal-mining rights Kristle had acquired from the Indonesian government. The second novation agreement was preceded by a number of earlier agreements.

5 First, there was an agreement dated 15 August 1994 (“the coal mining agreement”) whereby PT Tambang Batubara Asam (Persero) (“PTBA”), a company owned by the Indonesian government, agreed to grant PT Gunung Bayan Prarama Coal (“GBPC”) the right inter alia to develop coal reserves in designated zones in Kalimantan (“the designated areas”). PTBA is now defunct and its role of coordinating coal mining activities in Indonesia has been taken over by the Indonesian Ministry of Mines and Energy (“MME”).

6 Subsequently, GBPC and a company called Japanese Overseas Coal Ltd (“JOC”) entered into three agreements (“the 3 Agreements”) on or about 12 April 1995 to set up a joint-venture company (“the PMA Company”). JOC was a company incorporated in Japan, whose principal shareholder and President-Director at the time was the second defendant. It was envisaged by the parties that the PMA Company would have the right to explore and mine coal in the designated areas.

7 Pursuant to the 3 Agreements, JOC was to hold 65% of the share capital of the PMA Company for the first five years and thereafter 60% of the share capital for the subsequent 25 years. In addition, JOC was to have 100% of the selling rights of the coal from the designated areas.

8 By a Memorandum of Understanding dated 14 April 1995 and made between GBPC and JOC, GBPC agreed that JOC’s rights and obligations under the 3 Agreements could be assigned and transferred to a third party.

9 By a novation agreement dated 31 October 1995 (“the first novation agreement”) and made between JOC and Kristle, JOC assigned and transferred its rights and obligations under the 3 Agreements to the latter. A day later, Kristle in turn entered into the second novation agreement with ICP at [4]. By virtue of the two novation agreements, ICP essentially, took over the rights of JOC under the 3 Agreements for a consideration of US$4.5m payable in five instalments.

10 As part of its obligations under the second novation agreement, ICP had to and which it did, enter into three new agreements (“the 3 New Agreements”) with GBPC on 1 November 1995. Further, at Kristle’s request, PTJS and Low executed a guarantee dated 1 November 1995 (“the Guarantee”) of ICP’s obligations.

11 After ICP had paid US$1m in two payments to Kristle pursuant to the second novation agreement, disputes and differences arose between ICP and Kristle which were referred to arbitration in accordance with the terms of the second novation agreement. The arbitration proceedings were carried out under the auspices of the Singapore International Arbitration Centre (“SIAC”) in SIAC Arbitration No. 78 of 1999 with ICP as the claimant and Kristle as the respondent. For the purposes of the arbitration, ICP and Kristle agreed that the applicable law governing the parties under the second novation agreement was Singapore law, the applicable law of the arbitration was the International Arbitration Act Cap 143A Revised 2004 edition (“The IAA”), the SIAC would administer the arbitration and the SIAC Rules 1977 (“the 1997 Rules”) would govern the conduct of the arbitration.

12 The arbitration proceedings took place between 12 November 1999 and 7 December 2000 (“the arbitration”) and the tribunal issued its final award on 31 January 2001 (“the Award”). ICP failed in its claim that the second novation agreement was void for total failure of consideration while Kristle succeeded in its claim for the balance payment due under the second novation agreement (US$3.5m) together with interest (US$289,972.60) and was also awarded (i) costs of the arbitration (S$241,737.75 and US$160,000); (ii) disbursements of S$12,960.61 and A$7,072.38; (iii) S$115,000 as reimbursement of the deposit paid by Kristle to SIAC and (iv) S$11,797.75 being reimbursement to Kristle of the balance costs paid to SIAC.

13 On or about 28 June 2001, Low together with one Lim Chai Hock (“Lim”) a director of GBPC, met the second defendant in Tokyo. A gentleman by the name of Kyojiro Nakahara (“Nakahara”) acted as the second defendant’s interpreter as the latter speaks little English. The plaintiffs alleged that the parties eventually reached a compromise (“the settlement agreement”) at the meeting in that ICP agreed it would pay Kristle US$3m in full and final settlement of the Award (“the settlement sum”). The plaintiffs claimed that the settlement agreement also discharged PTJS and Low from their liabilities as guarantors of ICP.

14 Under the terms of the settlement agreement, Kristle was supposed to draft a document formalising the same in order to trigger the first payment of US$300,000 by ICP. The first payment would then be followed by 27 monthly payments of US$100,000 each, beginning a month after the first payment. No draft document was prepared by Kristle despite its letter to ICP dated 6 July 2004 stating the same was being prepared by Kristle’s lawyers. In the event, Kristle never received any payment of the settlement sum from ICP.

15 In the exchange of correspondence between ICP and Kristle subsequent to the settlement agreement, ICP alleged that Kristle repeatedly said it would not enforce the Guarantee against PTJS and Low.

16 However, in Kristle’s letter dated 1 September 2001 to ICP signed by the second defendant, Kristle informed ICP that it had been placed under the control of its creditors and that the terms of the settlement agreement were not acceptable to Kristle’s creditors.

17 Kristle then applied to the High Court in Originating Summon No. 2255 of 2006 and was granted leave on 1 December 2006 to enforce the Award as a judgment. ICP’s attempt to set aside the leave granted was dismissed on 21 December 2006. ICP’s appeal against the dismissal was similarly dismissed by a judge in chambers on 28 January 2008. Consequently, judgment on the Award was entered against ICP on 30 January 2008.

18 Rule 34.6 of the 1997 Rules (“the Confidentiality Rule”) bound the parties to keep the arbitration confidential. The Confidentiality Rule states:

The parties and the Tribunal shall at all times treat all matters relating to the proceedings (including the existence of the proceedings) and the Award as confidential. A party or any arbitrator shall not, without the prior written consent of the other party or the parties as the case may be, disclose to a third party any such matter except:

(a) for the purpose of making an application to any competent court;

(b) for the purpose of making an application to the courts of any State to enforce the Award;

(c) pursuant to the order of a court of competent jurisdiction;

(d) in compliance with the provisions of the laws of any State which is binding on the party making the disclosure; or

(e) in compliance with the request or requirement of any regulatory body or other authority which, if not binding, nonetheless would be observed customarily by the party making the disclosure.

ICP alleged that in breach of the Confidentiality Rule, Kristle wrongfully disclosed confidential information relating to and arising out of the arbitration to various third parties including creditors of Kristle and the MME [5]. It was alleged that the second defendant had also lodged a complaint against ICP with the Tokyo office of Interpol Japan who then contacted their Indonesian counterpart in Jakarta, on an allegation that Low had defrauded the second defendant.

19 ICP commenced the first suit on 5 January 2005 followed by the second suit on 16 January 2006.

The pleadings

20 In the first suit, ICP alleged that Kristle had breached its duty of confidentiality by wrongfully disclosing confidential information relating inter alia to

(i) the existence of the arbitration and/or the subject matter of the arbitration and the circumstances under which the arbitration arose;

(ii) documents prepared for and in the course of the arbitration,

(iii) the outcome of the arbitration and

(iv) the Award.

ICP sued the second defendant on the basis that he procured the breach by Kristle of the Confidentiality Rule and was the controlling mind and will of Kristle.

21 The plaintiffs inter alia prayed for an injunction to restrain the defendants from disclosing or otherwise making use of any and all of the confidential information relating to or arising out of the arbitration and/or Award.

22 The...