BNP Paribas Wealth Management v Jacob Agam and another

• Court: International Commercial Court (Singapore)
• Judge: Steven Chong J
• Judgment Date: 17 February 2017
• Neutral Citation: [2017] SGHC(I) 2
• Citation: [2017] SGHC(I) 2
• Published date: 23 February 2017
• Plaintiff Counsel: K Muralidharan Pillai, Luo Qinghui and Andrea Tan (Rajah & Tann Singapore LLP)
• Defendant Counsel: Cheong Yuen Hee (instructed counsel) and Mohamed Zikri bin Mohamed Muzammil (instructing counsel) (Hin Tat Augustine & Partners)
• Docket Number: Suit No 2 of 2016 (Summons No 24 of 2016)
• Hearing Date: 12 January 2017,14 November 2016
• Date: 05 March 2018
• Subject Matter: Parties,Civil Procedure,Substitution

Roger Giles IJ (delivering the judgment of the court):

The proceedings were brought by BNP Paribas Wealth Management (“BNPWM”). BNP Paribas SA (“BNPSA”) has applied to be substituted for BNPWM as plaintiff, consequent upon a merger whereby it succeeded to the assets and liabilities of BNPWM. The application is opposed by the defendants.

For the reasons which follow, the application should be granted.

The proceedings

BNPWM was a private bank, providing banking and investment services to its customers. It was incorporated in France and a wholly owned subsidiary of BNPSA. It acted in Singapore through a Singapore branch, and was registered in Singapore as a foreign company.

The defendants, who are brother and sister, are Israeli citizens. They owned through companies a number of properties in France and Monaco.

In 2010, BNPWM advanced approximately €61.7m to the companies, in part to refinance the properties and in part to provide a fund for investment. The security for the loans included personal guarantees by the defendants. The transaction was arranged and entered into through the Singapore branch of BNPWM, and the documentation provided for Singapore law as the governing law and for the jurisdiction of the Singapore courts.

Intermediate events brought repayment of some of the loans, but they were not fully repaid on maturity in 2015. On 27 November 2015, BNPWM brought proceedings against the defendants in the Singapore High Court, claiming approximately €30m from them as guarantors of the obligations of two of the companies. The defendants filed defences to the claim, and the first defendant also brought a counterclaim against BNPWM. In April 2016 the proceedings were transferred to the Singapore International Commercial Court.

The defendants’ application to stay the proceedings in favour of France was dismissed by this court on 28 October 2016 – see BNP Paribas Wealth Management v Jacob Agam and another [2016] SGHC(I) 5.

The merger

The merger between BNPWM and BNPSA was effected pursuant to the French Commercial Code (“the Code”),¹ relevantly reading (in translation):

Article L236-1

One or more companies may, by means of a merger, transfer their assets to an existing company or to a new company which they shall form.

One company may also, by means of a division, transfer its assets to several existing companies or to several new companies.

These options shall be open to companies being wound up …

…

Article L236-3

I.- The merger or division shall lead to the dissolution without winding-up of the companies which are disappearing and the universal transfer of their assets to the receiving companies, in their current state on the date when the operation is finally carried out. …

…

Article L236-6

All the companies participating in one of the operations indicated in Article L.236-1 shall prepare a merger or division plan.

This plan shall be filed with the registry of the Tribunal de commerce in whose jurisdiction the registered offices of these companies are situated and shall be published in accordance with the terms fixed by a Conseil d’Etat decree.

In order for the operation to be valid, the companies participating in one of the operations indicated in the first and second paragraphs of Article L.236-1 shall be required to file with the registry a declaration in which they shall record all the acts carried out in order to proceed with this operation and by which they shall confirm that the operation has been carried out in accordance with the acts and regulations. The clerk, under his responsibility, shall ensure the conformity of the declaration with the provisions of this article.

It was common ground in the application that a merger so made takes effect by the doctrine of universal succession under French law, resulting in the transfer of all assets and liabilities.

In conformity with Article L.236-6, on 25 February 2016, BNPSA and BNPWM executed a merger agreement (“the Merger Agreement”). BNPSA was “the absorbing company”, and BNPWM was “the absorbed company”. Recital II of the Merger Agreement recorded that the merger “consists of the absorption of [BNPWM] by [BNPSA], with the suppression of its legal personality”, and that it “will be executed according to the provision of Articles L.236-1 and following” of the Code.²

Section I of the Merger Agreement listed the values of the assets and liabilities of BNPWM and stated that, subject to satisfaction of the conditions precedent later recorded, BNPWM “contributes to [BNPSA], by way of a universal transfer of its assets and liabilities in France and abroad… all of the assets and liabilities composing its assets and liabilities on the Closing Date…” (Article 1.1).³ It was further stated in the same Article that the merger “entails on the Closing Date the universal transfer of all of the assets and liabilities of [BNPWM], which shall be entirely vested in [BNPSA] in the state in which they shall be on this date”.

Section II provided that the merger should be completed and final on the Closing Date, subject to the satisfaction of a number of conditions precedent.⁴ They included:

… the absence of incapacity to obtain any… approval, authorization or exemption… in… Singapore, coming from or imposed by… the Monetary Authority of Singapore… (or any other applicable regulatory authority), which would have a material adverse effect on the implementation of the merger or the continuation of the transferred business…

The Closing Date depended on the consent of the European Central Bank on the withdrawal of BNPWM’s banking licence, and in the event was 1 October 2016.⁵

Section III⁶ was brief, in the terms:

The final completion of the merger by absorption of [BNPWM] by [BNPSA], following the satisfaction of the conditions precedent provided in Section II above, shall have as a consequence, on the Closing Date, the universal transfer of the assets and liabilities of Wealth Management and its winding-up without liquidation.

Section IV⁷ included:

Article 4.1 – General Conditions

A) [BNPSA] shall be generally subrogated purely and simply on the Closing Date in all the rights, legal actions, obligations and miscellaneous commitments of [BNPWM]. B) [BNPSA] shall be subrogated from the Closing Date in the benefits and obligations of the contracts and commitments of any kind, validly binding [BNPWM] vis-à-vis third parties.

If need be, it shall be responsible to obtain the permission of any third parties whatsoever, with [BNPWM] undertaking to take measures aimed at the transfer of the said contracts and commitments each time that this shall be necessary.

C) [BNPSA] shall take responsibility for the assets and rights of [BNPWM] and, in particular, the business contributed to it with all its tangible and intangible assets forming part thereof, including the items, notably moveable items and equipment, in the state in which they shall be on the Closing Date. D) The contributions of [BNPWM] are granted and accepted in exchange for the obligation undertook by [BNPSA] to pay all liabilities of [BNPWM], as specified above. Generally, [BNPSA] shall assume responsibility for all of the liabilities of [BNPWM] existing on the Closing Date.

…

E) [BNPSA] shall comply with the laws, decrees, resolutions, regulations and practices concerning the uses of the same kind as that of the assets contributed and it shall be responsible for all the authorisations which shall be necessary, for its own account and its risks.

Article 4.1 was followed by specific provisions in Article 4.2, including: A) Assumption of the disputes

[BNPSA] shall have full powers from the Closing Date, notably to bring or defend any legal actions in progress or which may be brought in the place of [BNPWM] concerning the assets contributed, to accept any decisions and to receive or pay any amount due because of a judgement or settlement agreements.

The Merger Agreement was duly filed and published as required by Article L.236-6 of the Code, and on 12 October 2016 a declaration of conformity as also required was filed with the Commercial and Companies Registry of Paris.⁸ On 12 October 2016 it was recorded against BNPWM’s French registration that it was struck off upon “[m]erger absorption” by BNPSA.⁹ BNPWM’s Singapore branch also surrendered its banking licence in Singapore. This was notified in the Government Gazette on 3 October 2016.¹⁰

It became common ground in the application that all necessary steps had been taken as required by French law, and that the merger by the universal transfer of assets and liabilities and the winding up of BNPWM was effective in France. The merger has been acted upon in France: BNPSA was duly substituted for BNPWM in the French proceedings brought by the second defendant and her companies against BNPWM.

The application for substitution

On 27 October 2016, BNPSA filed the present application to be substituted as plaintiff in place of BNPWM, as transferee of the interest of BNPWM, pursuant to O 15 r 7(2) of the Rules of Court (Cap 332, R 5, 2014 Rev Ed).

The defendants opposed the application on two bases, which we will shortly describe. Their written submissions included that since BNPWM no longer existed, the proceedings had abated and substitution of BNPSA was academic. We do not think that the defendants persisted in this submission, which in any event we would not accept. Succession to the assets and liabilities of BNPWM, if effective, would have preserved the cause of action and substitution of plaintiff would be available (see Toprak Enerji Sanayi AS v Sale Tilney Technology plc [1994] 1 WLR 840).

The first basis of opposition

The defendants’ first argument rested upon the statements in Article 4.1A and B of the Merger Agreement that BNPSA “shall be generally subrogated” and “shall be subrogated” (“sera...