PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd and others

• Jurisdiction: Singapore
• Judge: George Wei J
• Judgment Date: 12 May 2017
• Neutral Citation: [2017] SGHC 102
• Court: High Court (Singapore)
• Docket Number: Suit No 542 of 2012
• Year: 2017
• Published date: 14 April 2018
• Hearing Date: 06 May 2016,31 March 2016,18 March 2016,30 March 2016,04 April 2016,14 March 2016,01 April 2016,21 March 2016,29 March 2016,05 April 2016,15 July 2016,24 March 2016,19 May 2016,18 May 2016,16 March 2016,15 March 2016,17 May 2016,05 May 2016,17 March 2016,16 May 2016,28 March 2016
• Plaintiff Counsel: Prem Gurbani, Govintharasah s/o Ramanathan and Sarah Kuek (Gurbani & Co LLC)
• Defendant Counsel: Ong Tun Wei Danny, Yam Wern-Jhien, Eugene Ong and Jeremy Gan (Rajah & Tann Singapore LLP),Davinder Singh SC, Zhuo Jiaxiang and Timothy Lin (Drew & Napier LLC)
• Subject Matter: Commercial Transactions,Sale of Goods,Damages for Breach of Contract,Rights of Unpaid Seller,Tort,Conspiracy,Misrepresentation,Fraud and Deceit,Negligence,Duty of Care
• Citation: [2017] SGHC 102

George Wei J:

The present proceedings arose out of a contract between the plaintiff, PT Sandipala Arthaputra (“Sandipala”), and the second defendant, Oxel Systems Pte Ltd (“Oxel”), for the supply of microchips (“chips”) from the first defendant, STMicroelectronics Asia Pacific Pte Ltd (“ST-AP”). These chips were needed to fulfil Sandipala’s obligations under an Indonesian Government contract to produce electronic identification cards for its citizens.

The trial took place over 22 days between March and May 2016. Numerous highly contentious issues arose across the various claims and the counterclaim between the parties. For this reason, it is convenient to begin with a list of the main individuals involved in the suit and an overview of the disputes that have arisen.

Dramatis Personae

Sandipala is an Indonesian company that was incorporated in 1987.¹ It carries on the business of, inter alia, the production of personalised electronic identification cards.² In late 2010 or early 2011, Sandipala was in considerable financial difficulties and was insolvent. On or about 19 January 2011, Paulus Tannos (“Mr Tannos”) purchased majority shares in Sandipala, to use it for new businesses. Most of the shares that were purchased were placed under the name of his wife, Lina Rawung (“Mrs Rawung”). Mr Tannos injected considerable capital into Sandipala.

As at 4 March 2011, the Board of Management of Sandipala was constituted as follows:³ President Director: Mr Tannos Director: Ms Catherine Tannos (“Ms Tannos”) Director: Ms Pauline Tannos President Commissioner: Mrs Rawung

Apart from Sandipala, Mr Tannos also controlled another company, PT Megalestari Unggul (“MLU”) in which he was the majority shareholder and its managing director.⁴

ST-AP is a company incorporated in Singapore in 1994. It carries on the business of, inter alia, marketing and selling chips and is part of the STMicroelectronics Group of companies (“ST”). The third defendant, Mr Vincent Cousin (“Mr Cousin”) was at all material times ST-AP’s country manager for Indonesia.⁵

ST had a Microcontrollers, Memory and Secure MCU product group (“MMS”) which included a Secure Microcontroller Division (“SMD”).⁶ Ms Marie-France Florentin (“Ms Florentin”) was the General Manager of the SMD and also an employee of STMicroelectronics (Rousset) SAS, a French company (“ST-F”).⁷ Mr Claude Dardanne (“Mr Dardanne”) was the head of MMS and Ms Florentin’s direct supervisor.⁸

The chips marketed by ST-AP are essentially manufactured in France by MMS and ST-F. These are then shipped to ST-AP’s customers. It appears that whilst the chips are made in France, finishing work is sometimes done overseas such as in Taiwan.

Oxel is a company incorporated in Singapore in 2009.⁹ It is in the business of the supply and sale of chips for use in personalised electronic identification cards or “smart cards”, and it has the licensing rights to sell a software suite known as PAC, which was one of the operating systems for the chips.¹⁰ Oxel is wholly owned by Execorp Limited, a company incorporated in the British Virgin Islands.¹¹ Mr Andi Bharata Winata (“Mr Winata”) is Oxel’s Sales and Marketing Representative in Indonesia.¹²

The key events Sandipala’s participation in the tender

In early 2011, the Ministry of Home Affairs of the Indonesian Government (the “MHA”) invited tenders for the production and supply of personalised electronic identification cards which were referred to as “E-KTP Cards” for the Indonesian population (the “Tender”).¹³ Detailed requirements were set out including those touching on the chips and the operating system. Of especial significance was the obligation for each applicant to submit two chips for evaluation. The specific operating system that was to be masked onto the chips was not prescribed, save that it must be an “open operating system”, though this term was initially undefined. This led to questions from a consortium participating in the Tender, and the MHA subsequently clarified that an open operating system was one that could be put into the two types of chips specified.¹⁴

After Mr Tannos purchased majority shares in Sandipala, Sandipala entered into discussions with members of a consortium led by Perusahaan Umum (Perum) Percetakan Negara (“PNRI”) (collectively the “PNRI Consortium”) to include Sandipala in its bid for the Tender.¹⁵ Thereafter, Sandipala became a member of the PNRI Consortium by way of a Consortium Agreement dated 28 February 2011.

The PNRI Consortium comprised the following companies:¹⁶ (a) PNRI; (b) Perusahaan (Persero) Superintending Company of Indonesia (“Sucofindo”); (c) Sandipala; (d) PT Quadra Solutions (“Quadra”); and (e) Perusahaan (Persero) PT Len Industri (“Len Industri”). The roles and responsibilities of the consortium members were divided as follows:¹⁷ PNRI, the leader of the PNRI Consortium, was responsible for, inter alia, dealing with chip manufacturers and to produce a portion of E-KTP Cards. Sucofindo was responsible for conducting training seminars and classes. Sandipala was responsible for producing a portion of E-KTP Cards, personalising the same and thereafter distributing the E-KTP Cards, including those produced by PNRI. Quadra and Len Industri were jointly responsible for procuring and installing the necessary systems, such as the central government database, fingerprint and iris information collection systems and the key management system.

Shortly after Sandipala joined the PNRI Consortium, the PNRI Consortium submitted its tender proposal to the MHA. Whilst the evidence could have been clearer, it appears that the PNRI Consortium decided to use the following chips (made by different manufacturers) in their tender proposal: (i) NXP P308G0P3 (“NXP P3 chip”); and (ii) ST23YR12 (“ST23YR12 chip”).¹⁸ There is dispute and uncertainty as to the identity of the operating system provided with the ST23YR12 chip for the tender submission. I pause to note that the actual tender submission documents were not placed before the Court as Sandipala’s position was that these documents were with PNRI.¹⁹

The tender submission process comprised three distinct stages. A brief description of each stage has been set out below:²⁰ The Proposal Stage: Various participating consortiums submitted their tender proposals which provided for the technical aspects of the E-KTP Card production process. This included the specifications of the chip to be used in the E-KTP Cards. At this stage, each tender proposal would be assessed and some would progress to the next stage of the tender submission process. The Proof of Concept (“POC”) Stage: At this stage, the processes of population data collection, mass production and personalisation of E-KTP Cards were demonstrated to the MHA. This involved, inter alia, the use of a sample set of the proposed chips encoded with the proposed software and operating system. The successful consortiums would then proceed to the next stage. The Costs Stage: At this stage, the remaining consortiums would submit their quotes for costs of population data collection as well as production, personalisation and distribution of the E-KTP Cards to the MHA.

As part of the POC Stage of the Tender, the MHA conducted tests and evaluations of the chips provided by the PNRI Consortium at various locations between May and June 2011. This included one session at Sandipala’s factory on 20 May 2011 (“the POC test”).²¹ The evidence as to what chips and operating system were tested by the MHA at Sandipala’s factory was decidedly murky. Whilst it is clear that the NXP P3 chip and operating system were tested and evaluated by the MHA, it is entirely unclear whether the ST23YR12 chip was ever tested and evaluated. The simple reason is that the ST23YR12 chip encoded with RUA or RUB operating system was not ready in time for the POC test. Whilst Mr Tannos claims there were other tests, the only test in evidence is that on 20 May 2011.

On 21 June 2011, the MHA formally announced that it would award the Tender to the PNRI Consortium for the production and supply of 172,015,400 personalised E-KTP Cards for the Indonesian population which were to be produced and supplied in the years 2011 and 2012 (“the E-KTP Project”).²² The PNRI Consortium entered into a written agreement with the MHA on 1 July 2011 (“the E-KTP Card Production Agreement”).²³

It bears noting that two types of chips used by the PNRI Consortium in their tender proposal (as stated above at [13]) were approved for use in the E-KTP Cards: (a) the NXP P3 chip manufactured by NXP Semiconductors Group (“NXP”); and (b) the ST23YR12 chip manufactured by ST.²⁴ No operating system was specified.

On 9 June 2011, Sandipala entered into a further agreement with the other members of the PNRI Consortium (“the 9 June Consortium Agreement”).²⁵ Under the 9 June Consortium Agreement, Sandipala was supposed to produce 132m blank E-KTP Cards and personalise all E-KTP Cards.²⁶

The 9 June Consortium Agreement was subsequently amended pursuant to “the First Amendment to Distribution of Agreement Rights and Obligations of the Members of Consortium” dated 26 July 2011 (“the Amended Consortium Agreement”). Under the Amended Consortium Agreement, Sandipala’s share of work was reduced to producing, personalising and supplying 60% of the E-KTP Cards (ie, from about 132m E-KTP Cards to approximately 103m E-KTP Cards).²⁷ The remaining 40% of E-KTP Cards were to be produced, personalised and distributed by PNRI.²⁸

PNRI used the NXP P3 chip and operating system to meet its obligations. Initially, Sandipala also used the NXP P3 chip and system in respect of the E-KTP Cards due in 2011. Thereafter Sandipala decided to move away from the NXP P3 chip (as discussed below at [29]). The reason why this decision was made by Sandipala is unclear.

I pause here to explain the words “produce”, “personalise” and “distribute” in the...