SUPREME COURT OF SINGAPORE
14 February 2024
Case summary
SIC/OA 3/2023
SIC/OA 9/2023
Renault SAS v Liberty Engineering Group Pte Ltd [2024] SGHC(I) 6
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Decision of the Singapore International Commercial Court (delivered by Roger Giles IJ):
Outcome: The SICC allowed the claimant’s claim of €5,250,025.61 from the defendant under a Deed of Guarantee in SIC/OA 9/2023 but dismissed the claimant’s claim of the same in SIC/OA 3/2023.
Background and facts
1 AR Industries, a French wheel manufacturer, was placed under judicial restructuring in France. The claimant, Renault SAS, was its main customer. The defendant, Liberty Engineering Group, a Singapore-incorporated company, was interested in acquiring AR Industries with the claimant’s financial support. The defendant submitted a “sale plan” for the purchase of AR Industries by it or an entity controlled by it, and negotiated a Financial Services Agreement (“FSA”) with the claimant. The Commercial Court of Orleans adopted the sale plan and made orders to give effect to it. The FSA contained an agreement that the claimant would provide financial support to the purchaser of the business, whichever of the defendant or the entity controlled by it that purchased the business (“Purchaser”). The Commercial Court of Orleans acknowledged the FSA in its orders.
2 The FSA, governed by French law, outlined the terms for the provision by the claimant of financial support of €7,000,000 to the Purchaser, with payments scheduled from 2018 to 2020. The FSA stipulated that the Purchaser would reimburse the claimant in instalments over four years starting from 2022. If the Purchaser failed to comply with the repayment terms, the amount already paid would become immediately refundable by the Purchaser and the guarantors. In case of bankruptcy proceedings towards the Purchaser or if the Purchaser failed to reimburse the financial support in due time, the defendant committed to reimburse the claimant as guarantor, and to that end to provide a guarantee.
3 Liberty Wheels, a subsidiary of the defendant, was incorporated in June 2018. It replaced the defendant as the purchaser of AR Industries, as authorised by the Commercial Court of Orleans.
4 A guarantee dated 5 July 2018, governed by Singapore law, was given to the claimant by the defendant (“the Guarantee”). Parties were the defendant as Guarantor and the claimant as Financial Support Provider. The Guarantee defined the Purchaser as Liberty Wheels and included a definition for Bankruptcy Event. Under cll 2.1 and 2.2 the defendant guaranteed the Purchaser’s obligations towards the claimant “under or in relation with the provisions of” the FSA and on the failure of the Purchaser to pay any amount when due “under or in connection with” the FSA or upon a Bankruptcy Event. Clause 2.1(c) was an indemnity clause. The total recoverable amount was limited to €7,000,000.
5 Liberty Wheels, later Alvance, was placed under judicial restructuring by the Paris Commercial Court in April 2021. The claimant then demanded €7 million from the defendant, citing a Bankruptcy Event due to Alvance’s judicial restructuring proceedings. The claimant filed SIC/S 1/2022 (“Suit 1”), claiming the amount. Before the hearing, the claimant received €1,749,974.39 from a related company of the defendant. In Suit 1, the claimant argued that the defendant had a primary liability to pay the full amount upon the Bankruptcy Event. The defendant admitted the Bankruptcy Event but argued that it was only liable if the Purchaser failed to adhere to the payment terms in the FSA. The SICC held that the defendant’s promise to pay was tied to an amount due by the Purchaser. Since the full amount had not become payable by the Purchaser, it was not payable by the defendant. Suit 1 was accordingly dismissed.
6 After the commencement of Suit 1, Alvance’s judicial restructuring was converted to a judicial liquidation. Before the decision of Suit 1, the claimant commenced SIC/OA 3/2023 (“OA 3”), claiming the remaining amount of the financial support (ie, €5,250,025.61). It alleged that the conversion of the judicial restructuring into judicial liquidation rendered all unmatured debts of Alvance due and payable, so that the full amount had become payable by the Purchaser and so by the defendant as guarantor.
7 Following the decision of Suit 1, the claimant commenced SIC/OA 9/2023 (“OA 9”), again claiming €5,250,025.61 (the one amount, not twice over) and now on the basis that the failure in payment of the instalment of €1,750,000 due on 1 June 2023 had made the whole of the balance of the financial support immediately repayable and caught by cl 2.1 of the Guarantee.
8 A principal issue in both OA 3 and OA 9 was whether Alvance was liable to repay the claimant at all, because it was not a party to the FSA; if it was not, there was no obligation or amount due “under” the FSA to be caught by the Guarantee. That led to whether Alvance was liable to repay the claimant by an obligation “in relation with” its provisions or an amount due “in connection with” it, and to whether the claimant had sufficiently pleaded these alternative bases for its claim.
The Court’s judgment
9 OA 3 was not redundant, as the demand in OA 3 was made earlier in time than the demand in OA 9, and in OA 3 the interest could be a little greater: at [72].
10 Alvance did not become a party to the FSA under the principle of consensualisme in French law. Alvance did not exist at the time the FSA was entered into, and what could happen thereafter whereby it became a party to the FSA under consensualisme would require a meeting of the wills of all of Renault, LEG, and LHA together with Alvance, but the evidence was insufficient to come to that finding: at [80].
11 While under French law it was possible for a contracting party to be substituted by a third party in the contractual relationship, Alvance did not become a party to the FSA by way of substitution. There was no suggestion that the defendant was the Purchaser, was replaced by Alvance, but remained liable to repay the financial support directly as distinct from as guarantor. The clause in the opening of the FSA referred to the sale plan with its substitution clause and was not a substitution clause in the FSA. Nor did the FSA there or thereafter provide for the substitution of an entity within the Liberty Group as Purchaser in place of the defendant. Rather, the FSA recorded an agreement that the Purchaser would be whichever of the defendant or its entity that ended up as the purchaser of the business of AR Industries under the sale plan: at [90]–[91].
12 Even though the evidence was slim, a separate contract was made between Alvance and the claimant. Alvance requested that the instalments of the financial support in 2019 and 2020 be paid to it and received the instalments. Alvance and the claimant treated the payment of the 2019 and 2020 instalments as payments in accordance with the FSA as an agreement between them. Accordingly, the Court found that there was an implicit offer and acceptance and demonstration of the will of the claimant and Alvance to be bound to a contract for the receipt and performance of the respective rights and obligations of the claimant and the Purchaser as set out in the FSA, with liability to repay the financial support in accordance with its Article 5: at [94]–[96].
13 The claimant had sufficiently pleaded Alvance’s liability under a separate contract in its Replies. The pleadings made it abundantly clear that the claimant alleged that, if Alvance was not a party to the FSA, it was otherwise liable to repay the financial support, and identified the conduct relied on and the essential ingredients of the contract. The claimant could develop the legal conclusion, and the defendant could not be said to have been taken by surprise: at [104]–[105].
14 Under French law the acceleration of Alvance’s debts upon its judicial liquidation was not enforceable against a guarantor unless otherwise agreed between the parties. None of the provisions of the FSA or the Guarantee on which the claimant relied, nor the signature of the Guarantee with knowledge of the FSA, constituted agreement otherwise: at [107], [114], [119] and [122].
15 The claimant did not rely on the indemnity clause, but in any event it required proof of loss and the suffering of loss was not shown: at [125]–[126].
16 The FSA was an agreement between the claimant, the defendant and Liberty House Group concerning the provision of financial support to the Purchaser and the ordering from and supply of wheels by the Purchaser, with many provisions governing how those matters should occur. When (relevantly) the financial support was paid to Alvance as Purchaser, as between the parties to the FSA something occurring in fulfilment of the FSA in that respect, it was to be repaid as contemplated in the FSA. The corresponding repayment obligation under the separate contract made between the claimant and Alvance had a clear relationship with the provisions of the FSA or in connection with the FSA. The defendant’s submission, that “in relation with” and “in connection with” should be construed only to extend LEG’s obligations as guarantor to compensation to the claimant for breaches of the FSA such as in relation to the supply of wheels, in addition to obligations as guarantor for repayment of the financial support, was not accepted: at [129]–[130].
This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.