Renault SAS v Liberty Engineering Group Pte Ltd

• Jurisdiction: Singapore
• Judge: Roger Giles IJ
• Judgment Date: 19 May 2023
• Docket Number: Suit No 1 of 2022
• Court: High Court (Singapore)

Renault SAS

and

Liberty Engineering Group Pte Ltd

[2023] SGHC(I) 8

Roger Giles IJ

Suit No 1 of 2022

Singapore International Commercial Court

Contract — Contractual terms — Rules of construction — Wording of guarantee producing surplusage — Whether presumption against surplusage applied — Whether construction of contractual term constrained by its literal text

Credit and Security — Guarantees and indemnities — Interpretation — Parties entering into deed of guarantee — Whether clause in guarantee enlivened guarantor's liability upon event of bankruptcy

Held, dismissing the claim:

(1) Although the Guarantee was provided pursuant to the FSA, it was unsafe to construe the Guarantee as if it was intended to replicate the commitment in the FSA, and the Guarantee should be construed on its own terms: at [42].

(2) The court did not accept that it would be uncommercial or absurd that on a Bankruptcy Event, the reimbursement to Renault was to be according to the timetable in the FSA, subject to acceleration of payment if one of the instalments was not paid. Under the FSA, the opening of bankruptcy proceedings did not make the whole of the financial support (or such part as had not been repaid) immediately repayable by the Purchaser, but repayment was according to the timetable, showing that this was not uncommercial in the eyes of the parties: at [43].

(3) Upon a Bankruptcy Event, Renault could demand that Liberty pay “that amount” to it. On a textual reading, “that amount” was the amount due under or in accordance with the FSA which the Purchaser had not paid: at [44].

(4) The court acknowledged that event (ii) in cl 2.1(b) of the Guarantee produced no actual recovery of money which would not also be produced by event (i) in cl 2.1(b) of the Guarantee. However, while the presumption against surplusage was a well-established canon of construction, it was but an aid to construction, and could not justify giving words a meaning they would not bear: at [45] to [47].

(5) Renault's submission that upon event (i), the full amount of the financial support outstanding would become repayable, and “that amount” was intended to refer to the full amount, did not fit with the trigger of failure to pay “any” amount, which extended to an amount such as damages for breach of the FSA; the amount in event (i) was not a conceptual amount that would become payable upon the failure to pay an instalment, but a real amount that had become payable for any of a number of reasons: at [48].

(6) It was unnecessary to label any liability Liberty might have, or had incurred, as a primary or a secondary liability, and Renault did not gain any assistance from the other clauses of the Guarantee that it alluded to. Renault promised to pay amounts payable by the Purchaser; as at the commencement of the proceedings, the amount of the financial support was not payable by the Purchaser, and so it was not payable by Liberty: at [50].

[Observation: The Purchaser in this case was not Liberty, the defendant, but an entity controlled by Liberty which was not a signatory to the FSA. While the question of whether by French law, the Purchaser would be bound under the FSA to make repayment according to its terms was raised during the hearing, it was unnecessary for the court to address it. Even assuming in Renault's favour that the Purchaser was not bound under the FSA to make repayment according to its terms, labelling Liberty's liability as a primary liability for that reason did not advance Renault's position: at [51] and [52].]

Case(s) referred to

Antigua Power Co Ltd v AG of Antigua and Barbuda [2013] UKPC 23 (refd)

CIFG Special Assets Capital I Ltd v Ong Puay Koon [2018] 1 SLR 170 (folld)

Moschi v Lep Air Services Ltd [1973] AC 331 (refd)

PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2019] 1 SLR 30 (folld)

Swallowfalls Ltd v Monaco Yachting & Technologies SAM [2014] EWCA Civ 186 (refd)

TA Private Capital Security Agent Ltd v UD Trading Group Holding Pte Ltd [2023] SGHCR 1 (refd)

Total Transport Corp v Arcadia Petroleum Ltd [1998] CLC 90 (refd)

Travista Development Pte Ltd v Tan Kim Swee Augustine [2008] 2 SLR(R) 474; [2008] 2 SLR 474 (distd)

Vossloh AG v Alpha Trains (UK) Ltd [2011] 2 All ER (Comm) 307 (distd)

Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd [2015] 5 SLR 1187 (folld)

Yap Son On v Ding Pei Zhen [2017] 1 SLR 219 (folld)

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029; [2008] 3 SLR 1029 (folld)

Facts

The plaintiff, Renault SAS (“Renault”) was an automobile manufacturer incorporated in France. The defendant, Liberty Engineering Group Pte Ltd (“Liberty”), was a Singapore-incorporated company.

On 28 May 2018, Renault, Liberty and Liberty's holding company entered into a financial services agreement (“FSA”) where Renault agreed to provide €7m as financial support to the “Purchaser”, an entity controlled by Liberty, for the purchase of the activity and assets of another entity. The Purchaser was to reimburse Renault over four years according to a timetable set out in the FSA. The first repayment was due on 1 June 2022. Under the FSA, Liberty committed to reimburse the financial support “on first demand, in place of the Purchaser” if bankruptcy proceedings were opened towards the Purchaser.

On 28 July 2018, pursuant to this agreement, Liberty provided a guarantee (“Guarantee”) for the Purchaser's obligations. The Guarantee was more extensive than the commitment in the FSA, containing a guarantee of performance of “Obligations” widely defined and, relevantly, an undertaking that: “(i) whenever the Purchaser does not pay any amount when due under or in connection with the [FSA] or (ii) upon the occurrence of a Bankruptcy Event”, Liberty would pay “that amount” to Renault as if it was the Purchaser.

On 23 April 2021, the Paris court opened redressement judiciaire proceedings (a form of receivership or judicial restructuring) for the benefit of the Purchaser. This was a “Bankruptcy Event”. On 20 May 2021, pursuant to cl 2.1 of the Guarantee, Renault demanded that Liberty pay the sum of €7m on the basis that a Bankruptcy Event had occurred and the full sum was payable to Renault. Liberty rejected the Renault's demand. According to Liberty, nothing was payable by it as guarantor because nothing was then payable by the Purchaser. The Bankruptcy Event did not accelerate repayment by the Purchaser, and as a matter of construction of the Guarantee, Liberty was only obliged to pay an amount payable by the Purchaser.

The sole issue for determination was whether cl 2.1(b) of the Guarantee provided for payment by Liberty upon the Bankruptcy Event.

Leo Zhen Wei Lionel, Liu Zhao Xiang, Chia Shi MeiandT Abirami (WongPartnership LLP) for the plaintiff;

Chew Kei-Jin, Lee Chia MingandHannah Alysha bte Mohamed Ashiq (Ascendant Legal LLC) for the defendant.

19 May 2023

Judgment reserved.

Roger Giles IJ:

Introduction

1 The plaintiff claims €7m and statutory interest from the defendant under a deed of guarantee dated 5 July 2018 (the “Guarantee”). The proceedings have come down to a question of construction of the Guarantee, understood together with a financial services agreement dated 28 May 2018 (the “FSA”) pursuant to which it was given.

2 For the reasons which follow, the claim should not succeed and the proceedings should be dismissed.

The FSA

3 The plaintiff, Renault SAS (“Renault”), a French incorporated company, is the well-known automobile manufacturer. On or about 16 January 2018, another French company, AR Industries, which had been a manufacturer of wheels for the automobile industry with Renault as its main client, was placed under redressement judiciaire, a form of receivership or judicial restructuring, by the Commercial Court of Orleans. The defendant, Liberty Engineering Group Pte Ltd (“LEG”), a Singapore incorporated company within the Liberty Group, was willing to acquire the operations and assets of AR Industries, but with financial support from Renault. To this end, the FSA was entered into between Renault, LEG and Liberty House Group Pte Ltd (“LHG”), the last-mentioned being said to be “the mother company” of LEG.

4 The FSA said in its opening that it:

… acts the terms and conditions agreed between Liberty Group and Renault within the frame of the sale of the activity and assets (the ‘Sale Plan’) of AR Industries … to Liberty Engineering [ie, LEG] or to any entity of Liberty Engineering's Group … which might be substituted to Liberty Engineering in the benefit of the Sale Plan (the ‘Purchaser’).

In Art 3 it described its purpose as being to specify “the respective and reciprocal commitments of the Parties within the frame of the acquisition, by the Purchaser, of the operations and assets of AR Industries”. In Art 4 it was provided that:

The terms and conditions of the Agreement have been agreed in consideration of an acquisition of the operations and assets by the Purchaser, which will carry out the activity within its Group.

The Purchaser shall be Liberty Engineering or any entity of Liberty Engineering's Group controlled by Liberty Engineering.

5 Article 5 dealt with the provision of funds by Renault and the repayment of the funds. In summary as to the provision of funds, Renault agreed to provide financial support totalling €7m to the “Purchaser” by payments of €1.5m on 1 July and 30 October 2018, €2.5m on 1 July 2019 and €1.5m on 1 July 2020. All payments were subject to the Purchaser complying with its commitments under the FSA, and the 2019 and 2020 payments were subject to provision of a guarantee by Aluminium Dunkerque, a company which the Liberty Group was in the process of acquiring, or agreement on an “alternative first demand guarantee of equivalent efficiency”. As to repayment of the funds, the article provided:

The Financial Support offered by Renault will be totally reimbursed by the...