PT Bayan Resources TBK v BCBC Singapore Pte Ltd

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
JudgeSundaresh Menon CJ,Judith Prakash JA,Dyson Heydon IJ
Judgment Date29 August 2018
Docket NumberCivil Appeal No 154 of 2017
Date29 August 2018

[2018] SGCA(I) 6

Court of Appeal

Sundaresh Menon CJ, Judith Prakash JA and Dyson Heydon IJ

Civil Appeal No 154 of 2017

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

Davinder Singh SC, Jaikanth Shankar, Chan Yong Wei, Lydia Ni Man Chuo, Phang Hwee GuangandTeo Li Fang (Drew & Napier LLC) for the appellants;

Francis Xavier SC, Alina ChiaandTee Su Mien (Rajah & Tann Singapore LLP) for the respondents.

Case(s) referred to

BCBC Singapore Pte Ltd v PT Bayan Resources TBK [2016] 4 SLR 1 (refd)

Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd [2015] 6 HKC 527 (folld)

CIFG Special Assets Capital I Ltd v Ong Puay Koon [2018] 1 SLR 170 (folld)

Lai Meng v Harjantho Johnny [1999] 2 SLR(R) 738; [1999] 3 SLR 524 (overd)

Morris v London Iron and Steel Co Ltd [1988] QB 493 (folld)

RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413; [2007] 4 SLR 413 (folld)

Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 (folld)

SCT Technologies Pte Ltd v Western Copper Co Ltd [2016] 1 SLR 1471 (folld)

Seldon v Davidson [1968] 1 WLR 1083 (not folld)

Tan Jin Sin v Lim Quee Choo [2009] 2 SLR(R) 938; [2009] 2 SLR 938 (folld)

Travista Development Pte Ltd v Tan Kim Swee Augustine [2008] 2 SLR(R) 474; [2008] 2 SLR 474 (folld)

Wee Kah Lee v Silverdale Investment Pte Ltd [2000] 2 SLR(R) 838; [2000] 4 SLR 429 (overd)

Contract — Breach — Joint venture company alleged to have exceeded its annual budget — Whether joint venture party unilaterally caused joint venture company to exceed its annual budget

Contract — Breach — Joint venture parties entered into joint venture deed to upgrade and sell coal — Joint venture party obliged to ensure supply of coal to joint venture company — Joint venture party ceased supply of coal — Whether obligation to supply coal was independent of innocent party's obligation to pay — Whether obligation to supply coal was triggered upon demand for coal — Whether failure to supply coal was condition of joint venture deed

Contract — Contractual terms — Interpretation of contracts — Joint venture to supply coal — Whether unilateral extension of funds constituted breach of joint venture deed

Contract — Remedies — Damages — Breach of joint venture deed — Whether innocent party was entitled to damages

Evidence — Proof of evidence — Onus of proof — Joint venture party unilaterally extended funds to joint venture — Whether innocent party bore burden of proving that joint venture company incurred obligation to repay extended funds

Facts

The appellants were PT Bayan Resources TBK (“BR”) and Bayan International Pte Ltd (“BI”). BR owned a number of Indonesian coal mining subsidiaries, including PT Bara Tabang (“Bara”) and PT Fajar Sakti Prima (“FSP”). The respondents were BCBC Singapore Pte Ltd (“BCBCS”) and Binderless Coal Briquetting Company Pty Limited (“BCBC”), both of which were subsidiaries of White Energy Company Ltd (“WEC”).

In 2006, BCBC and BI entered into a joint venture deed (“the JV Deed”) for the construction and commissioning of a coal briquette processing plant in Indonesia (“the Tabang Plant”). The parties also incorporated an Indonesian joint venture company, PT Kaltim Supacoal (“KSC”), with BCBCS holding 51% of the issued shares and BI holding the remaining 49%. Pursuant to a deed of novation, BCBCS and BR were eventually substituted for BCBC and BI respectively as the parties to the JV Deed.

Friction between the parties started to develop by November 2007, when they realised that they had underestimated the costs of the Tabang Plant. To exacerbate matters, in October 2010, a piece of legislation which set the benchmark price for the sale of minerals and coal in Indonesia (“the HBA Price”) came into force.

These developments led the parties and KSC to enter into a series of agreements. This included a “Priority Loan Funding Agreement” (“the PLFA”), under which BCBCS was to advance a revolving working capital facility of up to US$20m (later increased to US$40m) to KSC. In turn, BR was to provide KSC with a “Coal Advance”, which entailed BR supplying coal to KSC at the market price but requiring payment of only US$8 per tonne upon delivery. Additionally, KSC entered into coal supply agreements (“the 2010 CSAs”) with Bara and FSP, which were to supply coal to KSC at the HBA Price. However, pursuant to the “Coal Advance” under the PLFA, KSC only had to pay US$8 per tonne upfront.

Things came to a head in the last quarter of 2011. At a KSC board meeting in early November 2011 (“the November 2011 Board Meeting”), the appellants indicated that they wanted to exit the joint venture, and that they were willing to sell their shares in KSC to the respondents and WEC (collectively, “the WEC Parties”). The appellants were happy for the WEC Parties to continue with the joint venture on their own, and while BR remained willing to supply coal to KSC, this would have to be on arms' length terms and “at commercial rates”.

On 7 November 2011, shortly after the November 2011 Board Meeting, KSC requested for “a lot of coal” from Bara and FSP. Thereafter, on 9 November 2011, WEC made a public announcement on the Australian Stock Exchange to the effect that BR had formed the view that the joint venture might not be economically viable. On the same day, after WEC's announcement, BR instructed Bara and FSP to stop supplying coal to KSC.

Following the cessation of coal supply to KSC, the parties held a meeting on 17 November 2011. The appellants reiterated their desire to exit the joint venture, and again raised the possibility of the WEC Parties buying out their share of the joint venture for US$45m, which was the amount that they had invested up to that point in time. The only contemporaneous notes of the meeting suggested that the understanding between the parties was that BR would not resume the supply of coal to KSC until the appellants' shares in KSC were bought out (“the Buyout Condition”).

On 6 December 2011, an extraordinary general meeting of KSC's shareholders (“the 6 December 2011 EGM”) was held. At that meeting, the appellants repeated their intention to exit the joint venture, and intimated their desire to liquidate KSC unless their stake in KSC was bought out. They also denied having imposed the Buyout Condition, and maintained that BR would continue supplying coal to KSC at the HBA Price. It was undisputed that the meeting also touched on the possibility of putting the Tabang Plant into care and maintenance, although the parties were divided as to whether they had agreed to do so. On 15 December 2011, the Tabang Plant was put into care and maintenance.

On 27 December 2011, the respondents commenced legal proceedings against the appellants. Approximately two months later, on 21 February 2012, BR wrote to BCBCS purporting to terminate the JV Deed. Among other things, BR alleged that BCBCS had breached the terms of the JV Deed by unilaterally causing KSC to exceed its budget by about US$7m (“the Excess Expenditure”), and to exceed the US$40m PLFA facility limit by extending a further loan of about US$6m to KSC (“the Excess Debt”). On 2 March 2012, BCBCS replied stating that BR's purported termination constituted a wrongful repudiation of the JV Deed, which it accepted.

The first tranche of the matter was heard by the Singapore International Commercial Court (“the Court”), and primarily concerned the determination of the scope and content of the parties' obligations under the joint venture. The present appeal concerned only the Court's decision in the second tranche, which dealt largely with whether the parties had breached those obligations, and if so, the consequences that flowed therefrom.

There were four main issues on appeal: (a) whether BR was obliged to procure and/or ensure the supply of coal to KSC during the period from November 2011 to 2 March 2012; (b) if BR was under such an obligation, whether BR breached that obligation, and if so, whether that breach constituted a repudiation of the JV Deed; (c) whether BR repudiated the JV Deed by issuing the termination notice in its letter of 21 February 2012; and (d) if BR repudiated the JV Deed, whether such repudiation caused any loss to BCBCS, and if so, what was the period for which BCBCS was entitled to damages.

Held, dismissing the appeal but remitting the matter to the Court to determine the issue of whether BR had the financial ability to fund KSC:

(1) BR was obliged to procure and/or ensure the supply of coal to KSC because its business, as defined in the JV Deed, remained in operation during the relevant period despite the Tabang Plant having been put into care and maintenance. Notably, cl 7.1(x) of the JV Deed required BCBCS's and BR's unanimous consent to cease KSC's business, and cl 11 of the JV Deed provided a mechanism to break deadlocks. These clauses undercut the appellants' position that they were able to unilaterally bring about the cessation of KSC's operations and business simply by withholding consent to provide further funding: at [74] to [77].

(2) Article 7.1 of the PLFA imposed a separate and free-standing obligation on BR to ensure that Bara and FSP supplied coal to KSC pursuant to the 2010 CSAs. The PLFA refined BR's coal supply obligation to include an obligation to ensure that KSC was liable to pay only US$8 per tonne upfront for the coal supplied. It was difficult to see how BR could have advanced coal to KSC at this stipulated price without also simultaneously having an obligation to ensure the supply of coal to KSC: at [78] to [80].

(3) BR's obligation under the JV Deed and the PLFA to procure and/or ensure the supply of coal to KSC was not affected by whether KSC could have paid Bara and FSP for the coal supplied under the 2010 CSAs. This was because Bara's and FSP's coal supply obligations and KSC's payment obligation were independent obligations under the 2010 CSAs...

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5 cases
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    • Singapore
    • Court of Three Judges (Singapore)
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    ...2 SLR 905 (folld) Lin Choo Mee v Tat Leong Development (Pte) Ltd [2015] SGHC 99 (refd) PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2019] 1 SLR 30 (refd) Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 (refd) Travista Development Pte Ltd v Tan Kim Swee Augustine [2008] 2 SLR......
  • BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another
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    • International Commercial Court (Singapore)
    • 7 February 2022
    ...2, the issue of BCBCS’s ability to unilaterally fund KSC (see PT Bayan Resources TBK and another v BCBC Singapore Pte Ltd and another [2019] 1 SLR 30 at [175]). That issue was then remitted for our determination. Based on the evidence adduced in Tranche 2, we held that BCBCS was clearly in ......
  • BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another
    • Singapore
    • International Commercial Court (Singapore)
    • 9 January 2019
    ...(refd) BCBC Singapore Pte Ltd v PT Bayan Resources TBK [2017] 5 SLR 77, SICC (HC) (refd) PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2019] 1 SLR 30 (refd) Contract — Breach — Joint venture to upgrade coal — Funding of joint venture company — Whether Court of Appeal precluded any consid......
  • Tan Chin Hock v Teo Cher Koon and another and another appeal
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    • 6 April 2022
    ...that the payment was a gift. However, the Court of Appeal in PT Bayan Resources TBK and another v BCBC Singapore Pte Ltd and another [2019] 1 SLR 30 observed that Seldon was wrongly decided: see [140]–[144]. The court noted that in Seldon, the defence denied the essential ingredient in a lo......
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1 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2018, December 2018
    • 1 December 2018
    ...Ltd v BR Energy (M) Sdn Bhd [2014] 2 SLR 905 at [47]. 64 KS Energy Services Ltd v BR Energy (M) Sdn Bhd [2014] 2 SLR 905 at [93]. 65 [2019] 1 SLR 30. 66 [2018] 1 SLR 170 at [44], citing MGA International Pte Ltd v Wajilam Exports (Singapore) Pte Ltd [2010] SGHC 319 at [102]–[106]; Edwards J......

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