JIO Minerals FZC and others v Mineral Enterprises Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 11 November 2010
• Neutral Citation: [2010] SGCA 41
• Plaintiff Counsel: Cavinder Bull SC, Gerui Lim, Adam Maniam (Drew & Napier LLC)
• Docket Number: Civil Appeal No 72 of 2010
• Date: 11 November 2010
• Hearing Date: 09 September 2010
• Subject Matter: Choice of Law,Natural Forum,Conflict of Laws,Tort,Contract
• Year: 2010
• Citation: [2010] SGCA 41
• Defendant Counsel: Gan Kam Yuin (Bih Li & Lee)
• Court: Court of Appeal (Singapore)
• Published date: 20 December 2010

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction and facts

This was an appeal against the decision of the High Court judge (“the Judge”) who had refused to grant the defendants a stay of the action brought against them by the plaintiff (see Mineral Enterprises Ltd v JIO Minerals FZC and others [2010] SGHC 109).

Dissatisfied with the decision of the Judge, the defendants appealed. After hearing counsel, we allowed the appeal. We now give the detailed grounds for our decision.

The Parties

Mineral Enterprises Ltd (“the Respondent”) is the plaintiff. It is an Indian company with expertise in mining and marketing iron ore in India and internationally. The Respondent has projects in Indonesia which are coordinated by its Mining and Operations Manager, Joseph Cyriac (“Cyriac”).

JIO Minerals FZC (“the First Appellant”) is a company incorporated in the United Arab Emirates (“UAE”) and was set up by Jimmy Singh (“the Second Appellant”) and Raman Srinivasan (“the Third Appellant”). The First, Second and Third Appellants are the defendants and we will refer to them collectively as “the Appellants”. The Second Appellant is the President and Director of an Indonesian company known as PT JIO Energi Resources (“PT JIO”). The Second Appellant is also a commercial licensee and manager of the First Appellant. PT JIO owns iron ore mining concessions in 12 hectares of land in Pelaihari, Kalimantan (“the Pelaihari Concession”).

The Third Appellant is a commercial licensee of the First Appellant. Although it was suggested that the Third Appellant had control over PT JIO, together with the Second Appellant, the exact nature of the Third Appellant’s association with PT JIO was not addressed by the parties.

Initial Meetings in Indonesia

Cyriac met the Second and Third Appellants in Indonesia around August 2005. At this first meeting, Cyriac told the Second and Third Appellants that the Respondent was interested in mining iron ore in Indonesia. The Second and Third Appellants told Cyriac that a company that they controlled, PT JIO, had mining concessions in Pelaihari, Kalimantan.

Cyriac later visited the Pelaihari Concession. The outcome of this visit is disputed. The Appellants’ version is that Cyriac assessed that the Pelaihari Concession contained approximately 300,000 to 500,000 tonnes of iron ore and that Cyriac communicated this assessment to the Respondent’s directors. The Respondent’s version was that Cyriac did not explore the Pelaihari Concession because the Appellants did not provide sufficient facilities and logistical arrangements for Cyriac to do so.

The Singapore Joint Venture

On 7 April 2006, the Respondent entered into a joint venture agreement (“the Singapore JVA”) with JIO Corporation Pte Ltd (“JIO Singapore”), a Singapore company. The Second Appellant was the majority shareholder and a director of JIO Singapore.

The Singapore JVA provided for the incorporation of a joint venture company in Singapore. JIO Singapore was to procure marketing rights over at least 1 million tonnes of iron ore from Indonesia for the joint venture company. The Respondent and JIO Singapore were to have an equal number of shares in the joint venture company.

The Singapore JVA stipulated Singapore law as its governing law and included both a Singapore International Arbitration Centre arbitration clause and a forum selection clause for the Singapore courts.

After an amendment on 9 May 2006 to the Singapore JVA’s payment provisions, the Singapore JVA was, however, not pursued further. The Respondent’s director, H R Jain, deposed in his affidavit dated 18 January 2010 that the Singapore JVA was not pursued because of “the more advantageous income tax benefits” of forming the joint venture vehicle in the UAE instead.

JIO Singapore was struck off the register of companies in Singapore on 4 July 2008.

Visits to the Tanah Bumbu Concession

From February to August 2006, the Respondent’s representatives visited a mining concession in Tanah Bumbu, Kalimantan (the “Tanah Bumbu Concession”).

The Second Appellant deposed in his affidavit dated 23 November 2009 that two representatives of the local government in charge of the Tanah Bumbu Concession were aware of these visits by the Respondent’s representatives.

The Exclusive Mining Agreement

On 2 August 2006, the UAE Government of Ajman issued a commercial license to the First Appellant. Shortly thereafter, on 7 August 2006, the First Appellant entered into an agreement with PT JIO. This agreement was termed an “Exclusive Irrevocable Exploration, Exploitation, Mining and Marketing Agreement” (“the Exclusive Mining Agreement”). Under the Exclusive Mining Agreement, PT JIO appointed the First Appellant as “its sole and exclusive international agent with irrevocable rights of exploration, exploitation, mining and marketing of Iron Ore Concession [sic]”. The Exclusive Mining Agreement did not define the term “Iron Ore Concession”.

Under Article 5.1 of the Exclusive Mining Agreement, however, PT JIO represented that it had iron ore concessions with an estimated reserve of 1 million tonnes of “+65 Fe iron ore”.

The Exclusive Mining Agreement selected the laws of Ajman, UAE, as its governing law. The Exclusive Mining Agreement provided for disputes in connection with it to be resolved “under the rules of the UAE International Arbitration [sic]”.

On 7 September 2006, PT JIO sent the Respondent a copy of the Exclusive Mining Agreement via email. PT JIO sent the copy from Indonesia and the copy was received by the Respondent in India.

Meetings in Indonesia

The Respondent’s representatives had meetings and negotiations with the Second and Third Appellants in Indonesia in or around August 2006. The outcome of the meetings is material to the dispute between the parties.

According to the Appellants, the Respondent and the Appellants had agreed that the Pelaihari Concession was to be used as a “pilot project”. The Appellants further allege that the parties agreed that the Appellants would procure mining concessions with iron ore deposits of 1 million tonnes. In procuring these iron ore deposits, the Appellants were not to be limited to the Pelaihari Concession.

According to the Respondent, the outcome of the meetings was that the Respondent was to be given a first right of refusal for all other concessions that the Appellants held and that the Pelaihari Concession was to be the first project for the parties. The Respondent further alleged that the Appellants assured it at the meetings that they had control over the Tanah Bumbu Concession and could bring that concession within the scope of the joint venture that the parties intended to enter.

The Letter of Offer

On 7 September 2006, the First Appellant sent a letter of offer to the Respondent (“the Letter of Offer”). The Second Appellant signed the Letter of Offer.

The material terms of the Letter of Offer were as follows: The First Appellant offered the Respondent 50% shareholding in the First Appellant. The First Appellant represented that it “has a high grade iron ore reserve of 1 million tones [sic]”.

The Letter of Offer was sent from Indonesia. The Respondent received the Letter of Offer in India.

Cyriac’s Assessment of the Tanah Bumbu Concession

Cyriac visited the Tanah Bumbu Concession around the time when the First Appellant sent the Letter of Offer to the Respondent. After the visit, Cyriac made a written report (“the Cyriac Report”) that stated that the Tanah Bumbu Concession had approximately 5 to 6 million tonnes of iron ore deposits. The Cyriac Report was dated 14 September 2006.

The Appellants argued that the Respondent only accepted the Letter of Offer after it received the Cyriac Report. In contrast, the Respondent argued that it was not aware of the contents of the Cyriac Report before it accepted the Letter of Offer.

Payment of Consideration

The Respondent accepted the offer in the Letter of Offer by paying the requisite consideration (“the Investment Funds”) to the bank accounts of the Second and Third Appellants in Singapore on 27 September 2006. We will refer to the resulting contract between the parties as the “Investment Agreement”.

The Second and Third Appellants then transferred 30 and 20 shares, respectively, in the First Appellant to the Respondent.

The Respondent’s drilling activities at the Pelaihari Concession

The Respondent started drilling at the Pelaihari Concession some time after the Investment Agreement was concluded. The exact date when the Respondent’s drilling commenced and the extent of the Respondent’s drilling activities are, however, disputed.

The Appellants alleged that the Respondent’s drilling activities were insufficient for it to form a firm view on the amount of iron ore deposits in the Pelaihari Concession. The Appellants alleged that representatives of the local government in charge of the Pelaihari Concession witnessed the Respondent’s drilling activities and would be able to give evidence on those activities.

Partial Repayment of the Investment Funds

The Appellants returned the Respondent a sum of US$699,000. The purpose of this repayment is disputed.

The Appellants argued that the sum was returned because they felt that they had no choice but to return the unutilised portion of the Investment Funds because the Respondent was not going to restart drilling. The Appellants further argued that they did not agree to return the balance of the Investment Funds.

The Respondent alleged that the Appellants returned that sum because they admitted that the Pelaihari Concession did not contain sufficient deposits. The Respondent also argued that the Appellants promised to return the balance of the Investment Funds.

The Claim

On 19 February 2009, the Respondent commenced proceedings against the Appellants in the Singapore High Court for, inter alia: a...