Jacob Agam and another v BNP Paribas SA

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 18 May 2017
• Neutral Citation: [2017] SGCA(I) 1
• Plaintiff Counsel: Cheong Yuen Hee (Y H Cheong) (instructed) and Mohamed Zikri bin Mohamed Muzammil (Hin Tat Augustine & Partners)
• Docket Number: Civil Appeal No 71 of 2017
• Date: 18 May 2017
• Hearing Date: 12 May 2017
• Subject Matter: Statutory regulations,Overseas banks with representative offices,Banking
• Year: 2017
• Defendant Counsel: K Muralidharan Pillai, Luo Qinghui and Andrea Tan (Rajah & Tann Singapore LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2017] SGCA(I) 1
• Published date: 25 May 2017

Dyson Heydon IJ (delivering the grounds of decision of the court): Introduction

This is an expedited appeal against the orders of the Singapore International Commercial Court in BNP Paribas Wealth Management v Jacob Agam and another [2017] SGHC(I) 2 (“the Judgment”). At the end of oral argument, this court made an order dismissing the appeal, together with consequential orders. The court’s reasons for having taken that course are set out below.

The Notice of Appeal identifies a single ground of appeal:

Whether the Court had erred in its interpretation of Sections 14A to 14C and 55B to 55C of the Banking Act (Cap. 19) in determining that Court approval was not required in the instant case.

The parties and the commencement of the proceedings

The appellants are Jacob and Ruth Agam (“the Appellants”). They are citizens of Israel. They operate a number of companies (“the Appellants’ companies”).

BNP Paribas Wealth Management (“Wealth Management”) was a bank incorporated in France. It was a wholly-owned subsidiary of BNP Paribas SA (“Paribas SA”). Paribas SA is the respondent to the present appeal (“the Respondent”).

In 2010, Wealth Management (through its Singapore branch) advanced approximately €61.7m to the Appellants’ companies (“the Loans”). The Loans were secured by, inter alia, personal guarantees by the Appellants. The documentation for the Loan provided for the application of Singapore law and the jurisdiction of the Singapore courts.

The Loans were not fully repaid on maturity in 2015. Wealth Management commenced proceedings in the Singapore High Court in November 2015 for recovery of approximately €30m from the Appellants in their capacity as guarantors of the Loans (“the Main Proceedings”). Related proceedings have been instituted in France.

The Main Proceedings were transferred to the Singapore International Commercial Court in April 2016. The Main Proceedings have not yet been heard by that court.

The merger

As will be seen below, Paribas SA applied to be substituted for Wealth Management as plaintiff in the Main Proceedings. This application followed a merger whereby Paribas SA succeeded to the assets and liabilities of Wealth Management (“the Merger”). This was effected by a written merger agreement (“the Merger Agreement”).

The Merger Agreement is in French. Extracts below are as translated and reproduced in the decision at first instance.

The Merger Agreement purported by its recitals to be effected pursuant to Art L.236 of the French Commercial Code (“the Code”), which allows, inter alia, for the universal transfer of the assets of a company to an existing company. It was common ground at first instance 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”: the Judgment at [9].

Articles L.236-1 and L.236-3 of the Code provide, relevantly:

Article L.236-1

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 L.236-3

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 L.236-6 of the Code provides for mechanisms by which such a merger may take place.

Recital II to the Merger Agreement asserted, inter alia, that the Merger “consists of the absorption of Wealth Management by [Paribas SA], with the suppression of its legal personality”. Similarly, Art 1.1 of the Merger Agreement provided that the Merger “entails on the Closing Date the universal transfer of all of the assets and liabilities of Wealth Management, which shall be entirely vested in [Paribas SA], in the state in which they shall be on this date”. Section III provided that “[t]he final completion of the merger by absorption of Wealth Management by [Paribas SA] … 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”.

Article 4.1(A) of the Merger Agreement provided that “[Paribas SA] shall be generally subrogated purely and simply on the Closing Date in all the rights, legal actions, obligations and miscellaneous commitments of Wealth Management”. The term “subrogated” was similarly used in Art 4.1(B) (the term used in French was “sera subrogée”). Whether the use of the term “subrogated” was consistent with the use of that term in common law jurisdictions was at issue before the court at first instance.

Wealth Management was struck off the register of French companies upon “merger absorption” by Paribas SA on 12 October 2016. The surrender of Wealth Management’s banking licence in Singapore was notified in the Government Gazette on 3 October 2016. In the court below, the Appellants’ counsel admitted that the Merger was effective in France.¹

On 27 October 2016, Paribas SA filed an application to be substituted for Wealth Management in the Main Proceedings, pursuant to O 15 r 7(2) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed). This provision states as follows:

Where at any stage of the proceedings in any cause or matter the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may, if it thinks it necessary in order to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, order that other person to be made a party to the cause or matter and the proceedings to be carried on as if he had been substituted for the first-mentioned party. An application for an order under this paragraph may be made ex parte.

This application was the subject of the decision at first instance. In that decision, the court comprised Steven Chong J (as he then was) and Roger Giles and Dominique Hascher IJJ. Giles IJ delivered the judgment of the court. The court made orders, inter alia, for the substitution of Paribas SA as plaintiff in place of Wealth Management.

Relevant provisions

Section 55B of the Banking Act is found in Part VIIA Division 1 of the same. It applies to the transfer of the whole or part of the business of a “transferor” (defined by s 55A to mean “a bank in Singapore, the whole or part of the business of which is, or is to be, or is proposed to be, transferred under this Division”). And “transferee” is defined to mean “a bank in Singapore, or a company which has applied for or will be applying for a licence to carry on banking business in Singapore, to which the whole or part of a transferor’s business is, or is to be, or is proposed to be, transferred under this Division”. Section 55B(1) and (2) provides as follows: (1) A transferor may transfer the whole or any part of its business (including its non-banking business) to a transferee which is licensed to carry on banking business in Singapore, if — (a) where the transferor is a bank incorporated in Singapore, the Minister has consented to the transfer or has certified that his consent is not required; (b) where the transferor is a bank incorporated outside Singapore, the business to be transferred is reflected in the books of the transferor in Singapore in relation to its operations in Singapore; (c) the transfer involves the whole or part of the banking business of the transferor; and (d) the Court has approved the transfer. (2) Subsection (1) is without prejudice to...