East Asia Company Ltd v PT Satria Tirtatama Energindo
| Jurisdiction | UK Non-devolved |
| Judge | Lord Kitchin |
| Judgment Date | 27 June 2019 |
| Neutral Citation | [2019] UKPC 30 |
| Date | 27 June 2019 |
| Court | Privy Council |
| Docket Number | Privy Council Appeal No 0023 of 2018 |
[2019] UKPC 30
Lord Reed
Lord Carnwath
Lady Arden
Lord Kitchin
Lord Sales
Privy Council Appeal No 0023 of 2018
Privy Council
Trinity Term
From the Court of Appeal of Bermuda
Appellant
Michael Todd QC
Philip Gillyon
Shuvra Deb
(Instructed by Harcus Sinclair LLP)
Respondent
Mark Howard QC
Kyle Lawson
Rhys Williams
(Instructed by Withers (London))
Heard on 16 and 17 January 2019
In these proceedings the appellant, PT Satria Tirtatama Energindo (“PT Satria”), seeks an order under section 67 of the Bermuda Companies Act 1981 (“the 1981 Act”) for the rectification of the register of members of Bali Energy Ltd (“BEL”) by striking out the name of the respondent, East Asia Co Ltd (“EACL”), as the holder of all of BEL's issued shares and inserting in its place the name of PT Satria.
PT Satria relies for this purpose upon a document called “Heads of Agreement on the Sale and Purchase of Bali Energy Ltd” dated 27 February 2015 (“the HOA”). This was executed on behalf of PT Satria by Mr Wisnu Suhardono, its sole director, and on behalf of EACL by Mr Edwin Joenoes, one of its three directors. It was witnessed by Mr Ira Hata as the Chief Executive Officer of BEL.
PT Satria also relies upon a share transfer form (“the Share Transfer”) dated 1 March 2015 for the transfer of the shares in BEL from EACL to PT Satria. The Share Transfer was signed by Mr Joenoes on behalf of EACL as transferor in the presence of Mr John Columbo, an employee of PT Satria, who signed it as a witness. It was also signed by Mr Suhardono on behalf of PT Satria as transferee. The Share Transfer was purportedly approved by board resolutions of EACL and BEL on 1 March 2015.
The central issue in these proceedings is whether effect should be given to the HOA and the share sale agreement which it is said to contain, and to the Share Transfer. PT Satria contends that it should. It argues that the HOA was entered into by Mr Joenoes with ostensible authority, and that in any event it was properly ratified on 1 March 2015. It also argues that the Share Transfer was properly entered into by EACL and that it was duly approved by the boards of EACL and BEL on 1 March 2015.
EACL contends that it is not bound by the HOA. It argues, among other things, that Mr Joenoes had no ostensible authority to enter into it on behalf of EACL; that PT Satria was put on inquiry as to Mr Joenoes' lack of authority; and that Mr Joenoes and Mr Hata had a financial interest in the proposed sale which they failed to disclose to the board of EACL or the board of BEL with the consequence that the purported ratification of the HOA on 1 March 2015 was invalid and EACL was entitled to avoid the transaction, which it subsequently did. EACL also contends that, for like reasons, the Share Transfer was invalid and without legal effect; that BEL has properly refused to register it; and that BEL gave appropriate notice of that refusal within the three months required by the 1981 Act.
The action came on for trial before Hellman J in the Commercial Court of the Supreme Court of Bermuda. It lasted for ten days. On 21 October 2016, he gave judgment. He found in favour of PT Satria and ordered the rectification of the register which it sought ( [2016] SC (Bda) 90 Com).
On 18 September 2017, the Court of Appeal for Bermuda (Clarke JA, Kawaley AJA and Baker, President) allowed EACL's appeal and dismissed PT Satria's claim ( [2016] CA (Bda) 20 (Civ)). The Court of Appeal held, among other things, that the HOA was entered into by Mr Joenoes without the ostensible authority of EACL; that PT Satria was in any event put on inquiry as to Mr Joenoes' lack of authority; and that the HOA was not validly ratified by EACL at the meeting of its board on 1 March 2015 because the meeting was inquorate, and the HOA was avoidable at the election of EACL. For like reasons, there was no valid approval of the Share Transfer. It admitted into evidence a resolution of the board of BEL on 7 May 2015 not to register the Share Transfer and held that notice of that refusal was given in the time and manner required by the 1981 Act.
PT Satria now appeals to the Judicial Committee of the Privy Council with permission of the Court of Appeal granted by order dated 30 October 2017. It seeks restoration of the order for rectification made by the trial judge.
The issues to which the appeal gives rise are these:
i) whether Mr Joenoes had apparent or ostensible authority to enter into the HOA on behalf of EACL;
ii) whether PT Satria was put on inquiry as to Mr Joenoes' lack of authority to enter into the HOA on behalf of EACL;
iii) whether the HOA and the Share Transfer were avoidable at the election of EACL;
iv) whether the Court of Appeal was right to admit into evidence a resolution of the board of BEL on 7 May 2015; and
v) whether BEL refused to register the Share Transfer and gave notice within the three-month period stipulated by the 1981 Act.
There are three other issues before the Board: first, whether the Share Transfer was a proper instrument of transfer within the meaning of section 48(2) of the 1981 Act; secondly, whether a lack of consent from the Bermuda Monetary Authority precluded registration by BEL of the Share Transfer; and thirdly, whether a failure by BEL to provide notice of its rejection of the Share Transfer within the three-month statutory period would mean that PT Satria was entitled to registration as the owner of the shares in BEL. However, for reasons which will become apparent, it is not necessary for the Board to address them.
PT Satria is a company incorporated in Indonesia and is part of an Indonesian conglomerate called PT Satria Gemareska (“SGR”). SGR's business includes power generation and PT Satria's business includes the development of geothermal energy sites in Indonesia. Mr Suhardono is the president of SGR and one of its directors. He also owns 85% of the issued shares in PT Satria.
BEL is a company incorporated in Bermuda as an exempted company. At the relevant time it owned the rights to develop a geothermal energy site at Bedugul in Bali, Indonesia. These rights were secured by two agreements. One was a contract with PT Pertamina Persero, an Indonesian state-owned company, under which it was obliged to build and operate an electric power plant at Bedugul at its own cost and risk. The other was an energy sales contract under which, once the power plant had been built and was operational, PT PLN Persero (“PLN”), the Indonesian State power company, would buy electricity from BEL.
EACL is also incorporated in Bermuda as an exempted company. At least until the events giving rise to these proceedings, EACL owned all of the shares of BEL, and that shareholding was its only asset. The shares of EACL were originally held by a Japanese company, AIM Holdings Ltd (“AIM”). The chairman and principal of AIM was Mr Koji Matsumoto. He was also a director of BEL but resigned in 2013 when he was declared bankrupt by a court in Japan.
Affluent Ocean Ltd (“AOL”), a company incorporated in the Seychelles, became the owner of the shares of EACL in 2013. AOL is now owned and controlled by Mr Matsuo Watabe, though quite when and how he became its owner is not clear. He was entered on the register as holder of the one issued share in AOL on 20 January 2015.
At the beginning of 2015, BEL's two longest serving directors were Mr Joenoes and Mr Hata. They worked closely together and effectively ran BEL. Neither of them owned any shares in it. Mr Joenoes was appointed as a director of BEL in 2004 and as Chief of General Affairs on 4 December 2009. Mr Hata was appointed as Chief Executive Officer of BEL on 4 December 2009 and as a director on 24 December 2010.
BEL had three other directors at the beginning of 2015, Mr Kiyoshi Yamaura, Mr Yoshinori Matsumoto and Ms Masayo Matsumoto. None played any active role in the business of the company. Mr Yamaura was an old friend of Mr Koji Matsumoto, and Mr Yoshinori Matsumoto and Ms Masayo Matsumoto are Mr Koji Matsumoto's children. Mr Yamaura and Ms Masaya Matsumoto resigned as directors of BEL with effect from 1 April 2015, and Mr Yoshinori Matsumoto resigned as a director with effect from 15 April 2015.
As from 15 April 2015, the register of directors and officers of BEL showed that its directors were Mr Hiroichi Kitamoto and Mr Motonari Takeyama. They were purportedly elected as directors on 4 March 2015, and it is EACL's case that on that same day Mr Hata and Mr Joenoes were removed as directors.
At the beginning of 2015, EACL had three directors, Mr Joenoes, Mr Hata and Mr Yamaura. EACL contends that Mr Joenoes and Mr Hata were removed as directors on 4 March 2015 and that Mr Kitamoto and Mr Naotake Manaka were elected as directors in their place. Mr Yamaura resigned with effect from 20 March 2016.
By 2015 BEL had been in severe financial difficulties for many years. Indeed, by 2008 it had accumulated a substantial deficit and had a negative operating cash flow. Mr Joenoes and Mr Hata therefore sought a suitable investment partner or buyer and entered into discussions with several leading companies in the engineering and power generation sector. One of the companies with which they had discussions in 2011 and 2012 was PT Satria. Another was PT Praja Bumi Selaras (“PBS”). In 2012, PBS entered into a memorandum of understanding (“MOU”) with EACL and EACL's then beneficial owner, Mr Matsumoto. That expired in 2013 and PBS then entered into a second MOU with EACL and its new owner, AOL. PBS cancelled that second MOU in October 2014 which left BEL with a pressing need to secure funding. BEL issued cash calls to EACL and EACL in turn issued cash calls to AOL, but no cash was forthcoming.
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