PT Jaya Sumpiles Indonesia and Another v Kristle Trading Ltd and Another Appeal

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 28 May 2009
• Neutral Citation: [2009] SGCA 20
• Docket Number: Civil Appeals Nos 185 and 189 of 2008 (Summons No 452 of 2009)
• Date: 28 May 2009
• Published date: 02 June 2009
• Year: 2009
• Plaintiff Counsel: Yeo Soo Mong Tony and Rozalynne Asmali (Drew & Napier LLC)
• Citation: [2009] SGCA 20
• Defendant Counsel: Samuel Chacko and Angeline Soh Ean Leng (Legis Point LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether principle of co-extensiveness breached,Whether guarantee payable on demand,Guarantee contained "principal debtor" clause,Limitation of Actions,Whether s 6(3) Limitation Act (Cap 163, 1996 Rev Ed) applied,Guarantor guaranteed due performance of contract between principal debtor and creditor,Civil Procedure,Particular causes of action,Appeals,Credit and Security,Whether guarantor liable to pay any sum awarded in arbitration between principal debtor and creditor,Acknowledgment,Guarantee provided that guarantors shall pay upon demand by creditor,Whether guarantee had effect of accelerating guarantors' liability for other instalments,Whether leave to amend notice of appeal allowed,Whether letter was an acknowledgement of liability,Guarantee provided that guarantors shall pay all money balance payable under contract between principal debtor and creditor,Notice,Guarantee replete with words "guarantor" and "guarantee" with "primary obligor" used once only,Section 6(3) Limitation Act (Cap 163, 1996 Rev Ed),Guarantee provided that guarantors to pay on demand by creditor all costs, charges and expenses,Letter allegedly acknowledging liability not signed by guarantor,Whether guarantee was an indemnity,Guarantees and indemnities,Leave to amend notice of appeal to introduce new point of law at early stage,Contract between principal debtor and creditor contained arbitration clause,Word "indemnify" appeared once in contract between principal debtor and creditor,Amendment caused no prejudice to other party,Defendant's counterclaim based on guarantee,Judgments,Extension of limitation period,Guarantor not privy to arbitration proceedings between principal debtor and creditor,Section 26 Limitation Act (Cap 163, 1996 Rev Ed),Whether guarantor liable for arbitration award,Guarantor did not on face of letter authorise person to sign letter on his behalf

28 May 2009

Chan Sek Keong CJ (delivering the grounds of decision of the court):

Introduction

1 These two appeals arose from the decision of the High Court judge (“the Judge”) on 22 October 2008 in Suit No 12 of 2005 (“S 12/2005”), which was consolidated and heard together with Suit No 11 of 2005 (“S 11/2005”).

2 In S 11/2005, International Coal Pte Ltd (“ICP”) sought (inter alia) an injunction against Kristle Trading Ltd (“Kristle”) and Kazushi Toyoshige (“KT”) to restrain them from disclosing confidential information relating to an arbitration between ICP and Kristle. The Judge dismissed the suit (see International Coal Pte Ltd v Kristle Trading Ltd [2009] 1 SLR 945 (“the Judgment”)) and ICP did not appeal against that decision. The present appeals thus concerned S 12/2005 only.

3 In S 12/2005, PT Jaya Sumpiles Indonesia (“PTJS”), Low Tuck Kwong (“Low”) and ICP sought (inter alia) a declaration that PTJS and Low (collectively, “the Guarantors”) were not liable to Kristle under a guarantee dated 1 November 1995 (“the Guarantee”). The Guarantors had given the Guarantee to Kristle to secure ICP’s obligations under a novation agreement dated 1 November 1995 entered into between Kristle and ICP (“the Second Novation Agreement”), pursuant to which ICP took over a coal mining venture in Indonesia. Kristle counterclaimed against the Guarantors for the sum of US$3.5m which remained payable by ICP under the Second Novation Agreement (“the Outstanding Sum”), accrued interest thereon amounting to US$289,872.60 (“the Accrued Interest”), as well as all the other sums which had been awarded to it (“the Remaining Sums”) under an award made on 31 January 2001 (“the Award”) in an arbitration between it and ICP in relation to the latter’s rights and liabilities under the Second Novation Agreement. The Judge dismissed the Guarantors’ action and gave judgment to Kristle on its counterclaim for the Outstanding Sum and the Accrued Interest, but not for the Remaining Sums. Both the Guarantors and Kristle filed appeals against the Judge’s decision.

4 In Civil Appeal No 185 of 2008 (“CA 185/2008”), the Guarantors appealed to this court against the Judge’s decision on Kristle’s counterclaim. They reiterated their argument that they were not liable to Kristle under the Guarantee and also contended that, even if they were liable, their liability was limited to the Outstanding Sum and did not extend to the Accrued Interest. In Civil Appeal No 189 of 2008 (“CA 189/2008”), Kristle cross-appealed against the Judge’s decision that it was not entitled to claim the Remaining Sums. At the conclusion of the hearing, we dismissed both appeals. However, in respect of CA 185/2008, we varied the Judge’s order in relation to the principal judgment sum payable by the Guarantors, and also awarded costs against them on an indemnity basis for that appeal as agreed under the terms of the Guarantee. We now give our reasons for our decision.

Background facts

5 The facts relevant to the present appeals are as follows. On 15 August 1994, PT Tambang Batubara Asam (Persero) (“PTBA”), a company owned by the Indonesian government, granted PT Gunung Bayan Prarama Coal (“GBPC”) the right (inter alia) to develop coal reserves in designated zones in Kalimantan, Indonesia (“the Designated Areas”). On 12 April 1995, GBPC entered into three agreements with Japan Overseas Coal Ltd (“JOC”), a Japanese company, to set up a joint venture company (“PMA”) to develop coal reserves and conduct coal mining operations in the Designated Areas. KT was the president-director and principal shareholder of JOC at the material time. Under these three agreements (“the Three Agreements”), JOC was to hold 65% of the shares of PMA for the first five years and 60% of the latter’s shares for the subsequent 25 years. JOC was also to have 100% of the selling rights for coal from the Designated Areas.

6 By a novation agreement dated 31 October 1995 (“the First Novation Agreement”), JOC novated its rights and obligations under the Three Agreements to Kristle, which in turn novated its rights and obligations to ICP on 1 November 1995 via the Second Novation Agreement. Low was the managing director and majority shareholder of both ICP and PTJS at that time. As consideration for the novation by Kristle, ICP agreed to pay Kristle US$4.5m in five instalments at the times and in the manner set out in cl 3.1 of the Second Novation Agreement, namely:^{[note: 1]}

3.1.a) US$0.5 Million … within thirty (30) days from [the] signing date of this Agreement, before the day of November 30, 1995.

b) US$0.5 Million … exactly on the day of June 30, 1996.

c) US$1.0 Million … exactly on the day of December 20, 1997.

d) US$1.5 Million … exactly on the day of December 20, 1998.

e) US$1.0 Million … exactly on the day of June 30, 1999.

It was also agreed that the Guarantors would execute “a deed of guarantee and indemnify [sic]”^{[note: 2]} (see cl 9 of the Second Novation Agreement) in Kristle’s favour (this deed subsequently took the form of the Guarantee). The Second Novation Agreement contained the following arbitration clause (cl 13):^{[note: 3]}

Any and all differences and disputes of whatsoever [nature] arising out of this Agreement shall be put to arbitration in Singapore pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one to be appointed by [Kristle], one by ICP, and one by the two so chosen. The award of any two of the three on any point or points shall be final and binding [on] both parties.

7 ICP made the first two instalment payments, totalling US$1m, to Kristle. After paying the second instalment, ICP allegedly discovered (inter alia) that GBPC and JOC had failed to obtain approval from PTBA to enter into the Three Agreements. In ICP’s view, this meant that the transfer of rights from GBPC to JOC was not valid; this in turn meant that JOC did not transfer any rights to Kristle under the First Novation Agreement and that, consequently, ICP received no benefits from Kristle under the Second Novation Agreement. After negotiations with Indonesia’s Ministry of Mines and Energy, it was agreed that GBPC would be sold to Low and another partner(s) for US$2.5m. The sale was completed in November 1997. ICP later defaulted on the third instalment set out in the Second Novation Agreement, which was due on 20 December 1997.

8 The disputes between ICP and Kristle under the Second Novation Agreement were referred to arbitration 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. In the arbitration proceedings, ICP made several allegations against Kristle, including that of total failure of consideration and misrepresentation by Kristle. The arbitration tribunal made the Award on 31 January 2001 as follows:^{[note: 4]}

We AWARD, ADJUDGE and DIRECT that:

I. [ICP’s] claims in these proceedings shall stand dismissed with costs to be wholly borne by [ICP].

II. [ICP] shall pay [Kristle] US$3,5000,000 together with interest accrued thereon amounting in aggregate to US$289,972.60.

III. [ICP] shall bear the costs of this award of S$241,737.75.

IV. [ICP] shall bear and pay the costs of [Kristle] incurred in these proceedings which we hereby fix at US$160,000.00 together with disbursements of S$12,960.61 and A$7,072.38.

V. [ICP] shall reimburse to [Kristle] the sum of S$115,000, being the deposit to account made by [Kristle] to the SIAC.

VI. [ICP] shall pay to the SIAC the sum of S$11,797.75, being the balance of the costs of the [A]ward. If [Kristle] shall have paid the whole or any part of this sum in the first instance, [it] shall be entitled to immediate reimbursement from [ICP] of the amount so paid.

[emphasis in bold in original]

We should point out that, although the quantum of the Accrued Interest was stated as US$289,972.60 in the Award (see item (II) of the quotation above), Kristle counterclaimed for a sum of only US$289,872.60 under this particular head (see [3] above).

9 After the Award was made, there was an exchange of letters between the parties. On 23 February 2001, Kristle wrote to ICP asking for payment under the Award.^{[note: 5]} On 27 February 2001, ICP replied requesting that Kristle work out a payment plan with it because of the economic situation in Indonesia as well as the financial problems of ICP and Low.^{[note: 6]} Thereafter, there was a long exchange of letters, with ICP asking for meetings with Kristle to discuss an “amicable solution”^{[note: 7]} and Kristle repeatedly demanding payment under the Award and refusing to meet ICP anywhere except in Tokyo.

10 On 26 March 2001, Kristle made a formal demand on the Guarantors for payment, pursuant to the terms of the Guarantee, of the “amounts set out in the Award”^{[note: 8]} with interest at 6% per annum with effect from 1 February 2001 to the date of payment. On 28 March 2001, Low made a proposal for ICP to pay a total of US$3m in settlement of all the sums set out in the Award, with a first payment of US$300,000 and subsequent instalments of US$100,000 per month over 27 months.^{[note: 9]} Kristle rejected the proposal on the same day and counter-proposed a settlement amount of US$4m, with US$3.5m to be paid upfront as a lump sum within five days from 28 March 2001 and the remaining US$500,000 to be paid by 28 April 2001.^{[note: 10]}

11 Low replied to Kristle’s counter-proposal on 5 April 2001, stating that ICP was not able to make the payment.^{[note: 11]} Again, there was an exchange of letters between ICP and Kristle, with ICP seeking to find an amicable solution involving “a reasonable discount and a payment period of … a few years”^{[note: 12]} and Kristle continuing to demand payment. ICP claimed that it had no money, but Kristle pointed out that ICP was still operating the coal mines in the Designated Areas profitably. ICP and Kristle later arranged for a meeting, which...