Singapore Court of Appeal finds that company set up to promote sustainable development owed no fiduciary duty to communities adversely affected by environmental damage

30 January 2023

Ok Tedi Fly River Development Foundation Ltd & Ors v PNG Sustainable Development Program Ltd [2022] SGCA 76 

In Ok Tedi Fly River Development Foundation Ltd & Ors v PNG Sustainable Development Program Ltd, the Singapore Court of Appeal affirmed the decision of the High Court to strike out a claim for breach of fiduciary duties by representatives of communities in Papua New Guinea (“PNG”) against a special purpose vehicle set up to promote sustainable development in PNG. 

The appellants were representatives of certain communities in PNG which had been adversely affected by the environmental damage caused by the operation of a mine (“Mine”) (“Affected Communities”). The respondent, a Singapore-incorporated company, was the special purpose vehicle through which the Australian mining company now known as BHP Group Limited (“BHP Group”) would exit its investment in Ok Tedi Mining Limited (“OTML”), a company incorporated in PNG which owned and operated the Mine. 

The appellants commenced proceedings in the Singapore High Court in an attempt to secure, among other relief, payment of a fund held and administered by the respondent, arguing that the respondent had acted in contravention of fiduciary duties it allegedly owed to the Affected Communities. The appellants argued that in light of the circumstances giving rise to the incorporation of the respondent and the statement of its objects, it could be inferred that the respondent had voluntarily undertaken to act in the interest of members of the Affected Communities, and that by so undertaking, the respondent became a fiduciary and was subject to fiduciary duties that were owed to members of the Affected Communities. 

The High Court judge (“Judge”) struck out the appellants’ claims. The appellants appealed to the Court of Appeal, arguing that they should be allowed to take their claims to trial. 

Decision of the Court of Appeal 

The Court of Appeal affirmed the Judge’s decision, sustaining the Judge’s finding that the appellants’ case that the respondent owed a fiduciary duty to the members of the Affected Communities was plainly and obviously unsustainable.

The Court of Appeal observed that the Affected Communities were not party to the relevant contracts which recorded the substance of the arrangements through which BHP Group was to exit OTML. Those contracts had been carefully negotiated and it was untenable in those circumstances that a separate and effectively equivalent set of obligations had been undertaken as fiduciary obligations in favour of the appellants with whom the respondent was never in a contractual relationship. 

The appellants attempted to circumvent the lack of privity by describing themselves as beneficiaries of a fiduciary duty so that they could, in effect, take on all of the rights of the contractual counterparties and enforce them against the respondent. This included the respondent’s undertaking in its contracts to comply with a schedule to the respondent’s articles of association called the “Program Rules”. Among other things, the Program Rules set out a contractual framework permitting and obliging the respondent to apply the income from the Mine for the benefit of two classes of people: (a) the people of the Western Province of PNG; and (b) the people of PNG. The Court of Appeal, however, observed that it was not spelt out anywhere how the appellants (or the Affected Communities) acquired the right alleged or became a beneficiary of a fiduciary obligation owed by the respondent. The fact that the respondent had given various undertakings to the other parties to those contracts did not mean that it had given a similar undertaking to the appellants. In fact, the Court of Appeal said, the converse was more likely to be true. 

The appellants also argued that as the fundamental purpose behind the incorporation of the respondent was to ameliorate the environmental damage caused by continuing mining activities, the necessary nexus for a fiduciary relationship to be found between the respondent and members of the Affected Communities would be established if members of the Affected Communities were the ones adversely affected by the environmental damage caused by the Mine. The Court of Appeal disagreed, finding that ameliorating the environmental damage caused by the Mine was not identified specifically as even a part of the purpose for which the respondent was established. This fatally undermined the appellants’ case that the respondent had been established with the appellants (or members of the Affected Communities) specifically in mind. 

The Court of Appeal also rejected the appellants’ new arguments based on the existence of a trust relationship, finding that they were in substance a repackaging of the original fiduciary duty claim. 

Reference materials 

The judgment is available on the Singapore Courts website www.judiciary.gov.sg.