Jurong Shipyard Pte Ltd v BNP Paribas

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 06 June 2008
• Neutral Citation: [2008] SGHC 86
• Date: 06 June 2008
• Subject Matter: Whether originating summons qualifies as interlocutory proceeding under O 41 r 5 Rules of Court (Cap 322, R 5, 2006 Rev Ed),Bank issuing statutory demand against company for alleged debt,Bank colluding with agent,Whether representing party contractually estopped,Agent of company entering into alleged unauthorised transactions with bank,Test for granting injunction,Contractual estoppel,Company denying liability,Third party colluding with agent,Third party and principal’s relations,Winding up,Whether injunction should be granted,Third party having actual or constructive notice of agent's lack of authority,Originating processes,Use of winding-up process to recover a disputed debt,Whether company liable in respect of unauthorised transactions,Contract,Insolvency Law,Whether hearsay evidence admissible,Civil Procedure,Originating summons for injunction against winding up,Contractual relations,Representations made in Master Agreement that transactions entered into with proper authority,Hearsay evidence by affidavit,Company seeking injunction to restrain winding up pursuant to statutory demand,Contractual terms,Bank having actual or constructive notice of agent's lack of authority,Agency
• Docket Number: Originating Summons No 1727 of 2007
• Published date: 19 June 2008
• Defendant Counsel: Sundaresh Menon SC, Kam Su Cheun Aurill, Sim Jek Sok Disa, Tammy Low Wan Jun (Rajah & Tann)
• Court: High Court (Singapore)
• Plaintiff Counsel: Davinder Singh SC, Hing Shan Shan Blossom, Lim Pei Hoon Joan, Lin Yan Yan (Drew & Napier LLC)

6 June 2008 Judgment reserved.

Lee Seiu Kin J:

1 Jurong Shipyard Pte Ltd (“JSPL”) is a company incorporated in Singapore. It has been in the marine engineering business for four decades. In or around 2002, it ventured into rig building and this aspect of JSPL’s business expanded rapidly. Today, JSPL is a renowned “one-stop” shipyard, offering a comprehensive range of services in ship repair, shipbuilding, ship conversion, rig building and offshore engineering, and employing almost 2000 workers. Rig building represents a substantial part of JSPL’s business. Its immediate holding company is SembCorp Marine Ltd (“SCM”), a leading global marine engineering group.

2 BNP Paribas (“BNPP”) is one of the world’s largest international banking networks with a strong position in Asia and a significant presence in the United States. In 2007, it was sixth in the banking industry and first out of the French companies in the Forbes Global 2000 rankings.

3 On 23 November 2007, JSPL took out the present originating summons No 1727 of 2007 (“the present originating summons”) for an injunction to restrain BNPP from commencing winding-up proceedings subsequent to a statutory demand by BNPP for US$50,723,070 (“the alleged debt”), dated 20 November 2007.

Interlocutory applications

4 On 23 and 26 November 2007, I heard an opposed ex parte application in Summons No 5245 of 2007 for BNPP to be restrained from presenting any summons or other application for the winding up of JSPL based on the statutory demand. This application was settled by BNPP’s undertaking not to present any winding-up petition until the disposal of the originating summons or until further order of the court.

5 From 4 to 6 February 2008, I heard three applications regarding the admission of various affidavits: Summons No 329 of 2008 (“SUM 329/2008”); Summons No 294 of 2008 (“SUM 294/2008”); and Summons No 5493 of 2007 (“SUM 5493/2007”).

6 In SUM 329/2008 JSPL sought, inter alia, that “leave be granted to [JSPL] to file the fourth affidavit of Heinz Riehl and the sixth affidavit of Tan Cheng Tat” (“prayer 1”). Heinz Riehl is an expert witness for JSPL and his affidavit exhibited signed copies of an expert report and supplemental expert report that had been annexed to his earlier affidavits but not signed due to an oversight. Tan Cheng Tat is the financial controller of JSPL and his affidavit exhibited a press report which was published after JSPL’s affidavits were filed on 4 January 2008. BNPP did not object to the application and I gave an order in the terms of prayer 1.

7 In SUM 5493/2007, BNPP sought, inter alia, to expunge and strike out certain paragraphs and exhibits in the affidavit of Tan Kwi Kin (a director of JSPL) filed on 23 November 2007 on the grounds that they are scandalous, irrelevant and/or otherwise oppressive (“prayer 1”); to expunge and strike out certain paragraphs in the affidavit of Tan Cheng Tat filed on 23 November 2007 on the same grounds (“prayer 2”); as well as to expunge and strike out certain paragraphs and/or words in the affidavit of Tan Cheng Tat filed on 4 December 2007, again on the grounds that they are scandalous, irrelevant and/or otherwise oppressive (“prayer 3”). The evidence sought to be struck out broadly pertained to negotiations between the parties on the procedure to be used for the close-out on 31 October 2007 (see [24] and [25] below) and drafts of an agreement to be exchanged and executed by the parties in respect of this procedure (“the Close-out Agreement”: see [25] below), as well as the fact that BNPP had heard in the market that another bank, Societe Generale (“SG”), had received a conditional payment from JSPL and that a “without prejudice” meeting between BNPP and JSPL had been held. BNPP submitted that the evidence pertained to privileged discussions that were expressly stated to be made without prejudice. JSPL submitted that the evidence was admissible to show a collateral contract that JSPL would only pay after BNPP had brought an action and obtained judgment against it for the alleged debt; that BNPP was estopped from claiming privilege as it had represented to JSPL that it would not need to make an upfront payment of the alleged debt, which induced JSPL to enter into the Close-out Agreement; that the evidence was relevant for the purposes of rectification, if the court should find that the Close-out Agreement did not require JSPL to make such an upfront payment; and that the evidence was admissible if the court should find that the Close-out Agreement was ambiguous on this issue. I accepted JSPL’s submissions in respect of collateral contract and estoppel and declined to strike out the evidence relevant for the purposes of those arguments. Accordingly, I granted an order in terms of prayer 1 only in respect of para 90 of Tan Kwi Kin’s affidavit (pertaining to the conditional payment to SG) and exhibits at pages 130 and 132 (pertaining to the without prejudice meeting), and dismissed prayer 1 in respect of the other evidence; I also dismissed prayers 2 and 3.

8 In SUM 294/2008, BNPP sought, inter alia, to expunge and strike out from the court records the affidavit of Ajaib Haridass (a director of SCM and also a member of its Audit Committee and Chairman of the Board Risk Committee) and certain parts of the fourth affidavit of Tan Cheng Tat as well as the second affidavit of Tan Kwi Kin, both filed on 4 January 2008 (“prayer 1”) which broadly pertained to negotiations between JSPL and BNNP leading up to the close-out on 31 October 2007 (see [24] and [25] below). This was on the grounds that they are scandalous, irrelevant and/or otherwise oppressive. BNPP also sought leave to file an affidavit in response to certain parts of the second affidavit of Tan Kwi Kin, the second affidavit of Lee Yeok Hoon, the second affidavit of Wong Weng Sun, the second affidavit of Yu Ching Ong (all directors of JSPL) and the affidavit of Tan Boon Hoo (an expert witness for JSPL), all filed on 4 January 2008 (“prayer 2”) which pertained to an alleged BNPP suspense account (or sundry account) in which there was a credit standing in JSPL’s name: see [45] below. As an alternative to prayer 2, in the event that leave was not granted to file an affidavit in response as prayed for in prayer 2, BNPP sought for the parts of the affidavits enumerated in prayer 2 to be expunged and struck out from the court records on the grounds that they are scandalous, irrelevant and/or otherwise oppressive (“prayer 3”). JSPL’s submissions were the same as for SUM 5493/2007. It had no objection to prayer 2 but sought the leave of court to reply to BNPP’s reply affidavit. For the same reasons as for SUM 5493/2007, I dismissed prayer 1. I granted an order in terms of prayer 2, with no further order as to JSPL’s application to file a further reply. No order was given in respect of prayer 3.

9 I now turn to the background of the present originating summons.

Background facts

JSPL’s forex transactions with BNPP

The facility letters

10 Under the charge of its then-Chief Financial Officer, Wee Sing Guan (“Wee”), JSPL started forex hedging activities in 2002 in line with the expansion of its rig-building business. As most of the rig-building contracts were denominated in US dollars (“USD”), JSPL’s primary foreign currency inflows or receivables were denominated in USD (and this remains the situation today). JSPL also had some foreign currency inflows or receivables in Euro. On the other hand, most of JSPL’s expenses were in Singapore dollars (“SGD”), USD, Japanese Yen (“JPY”) and some Euro. Thus, the net USD foreign currency exposure was and is the largest financial risk that JSPL faces.

11 In order to hedge this risk, JSPL entered into forex transactions with a number of banks, including BNPP. It is not in dispute that BNPP and JSPL entered into various facility letters pursuant to which BNPP extended credit facilities to JSPL in relation to these forex transactions. JSPL has produced copies of several of these facility letters (“the facility letters”):

(a) A facility letter dated 9 October 2002, which began:

We are pleased to inform you that BNP Paribas, Singapore Branch (the “Bank”) has agreed to make available to Jurong Shipyard Pte Ltd (hereinafter referred to as “the Counter-Party”) an uncommitted forward exchange facility that shall be used for your hedging requirements subject to the conditions stated herein and also the Standard Terms and Conditions Governing Bank Facilities…annexed thereto.

[emphasis added]

(b) A facility letter between JSPL and BNPP dated 26 August 2003 (“the 26 August 2003 facility letter”) which provided credit lines for uncommitted forward foreign exchange and uncommitted foreign exchange options, and stated that “[t]he Facilities shall be used for hedging purposes”.

(c) A facility letter between JSPL and BNPP dated on 26 July 2004 (“the 26 July 2004 facility letter”) which provided a $25m multicurrency line for a short term loan and/or banker’s guarantee, as well as lines of credit for uncommitted forward foreign exchange, an uncommitted foreign exchange option and an uncommitted interest rate swap. The 26 July 2004 facility letter contained a purpose clause which stated:

PURPOSE

(a) The Short Term Loan Facility shall be used solely to finance the Borrower’s working capital requirements.

(b) The Forward Foreign Exchange Facility and Foreign Currency Option Facility shall be used for hedging the Borrower’s foreign exchange exposure only.

(c) The Interest Rate Swap Facility shall be used for hedging the Borrower’s interest rate exposure on its medium term loan(s) (“MTLs”).

[emphasis added]

(d) A letter from BNPP dated 19 September 2005 which amended the terms of the 26 July 2004 facility letter such that the maximum tenor of forex options was extended to 12 months. Some of the standard terms and conditions were also amended. However, it was not disputed that there was no amendment to the purpose of the...