Renault SAS v Liberty Engineering Group Pte Ltd

• Jurisdiction: Singapore
• Judge: Roger Giles IJ
• Judgment Date: 19 May 2023
• Neutral Citation: [2023] SGHC(I) 8
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 1 of 2022
• Hearing Date: 25 April 2023
• Citation: [2023] SGHC(I) 8
• Year: 2023
• Plaintiff Counsel: Leo Zhen Wei Lionel, Liu Zhao Xiang, Chia Shi Mei and T Abirami (WongPartnership LLP)
• Defendant Counsel: Chew Kei-Jin, Lee Chia Ming and Hannah Alysha Binte Mohamed Ashiq (Ascendant Legal LLC)
• Subject Matter: Contract,Contractual terms,Rules of construction,Credit and Security,Guarantees and indemnities
• Published date: 24 May 2023

Roger Giles IJ: Introduction

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.

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

The FSA

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.

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 Article 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 Article 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.

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 Purchaser to Renault over 4 years, as of 2022 (year 1) to 2025 (year 4), through a cash payment of 1,750,000 € per year made by the Purchaser to Renault on June 1st of each year (i.e. for the first time on June 1st, 2022), except if the Purchaser fails to comply with any of the repayment terms, in which case the amount of the Financial Support already paid will become immediately refundable by the Purchaser and the Guarantors 1, 2 and 3.

In the FSA, LHG was entitled Guarantor 1 and LEG was entitled Guarantor 2. From Article 10 next referred to dealing with the provision of guarantees, Aluminium Dunkerque was Guarantor 3.

Article 10 of the FSA was lengthy. It began:

In case of the opening of bankruptcy proceedings towards the Purchaser (sauvegarde, redressement judiciaire or liquidation judiciaire) and/or if the Purchaser fails to reimburse the Financial Support in due time (as referred to in Article 5) for any reason whatsoever, Liberty House Group, as Guarantor 1, commits to reimburse to Renault the Financial Support paid to the Purchaser, on first demand, in place of the Purchaser, within the same schedule. For the sake of clarity, it is specified that in case the amount of the Financial Support already paid becomes immediately refundable by the Purchaser, it will also become immediately refundable by the Guarantor 1.

Moreover, in case i) the Purchaser is an entity of Liberty Engineering’s Group substituted to Liberty Engineering in the benefit of the Sale Plan and ii) a bankruptcy proceedings is opened towards the Purchaser (sauvegarde, redressement judiciaire or liquidation judiciaire) and/or iii) the Purchaser fails to reimburse the Financial Support in due time (as referred to in Article 5) for any reason whatsoever, Liberty Engineering, as Guarantor 2, commits to reimburse to Renault the Financial Support paid to the Purchaser, on first demand, in place of the Purchaser, within the same schedule. For the sake of clarity, it is specified that in case the amount of the Financial Support already paid becomes immediately refundable by the Purchaser, it will also become immediately refundable by the Guarantor 2.

To this end, Liberty House Group and Liberty Engineering, each as far as it is concerned, commit to provide Renault, within 10 business days, following the signing of the Agreement, with (i) a first demand guarantee duly approved by their competent corporate bodies and (ii) a legal opinion from a Singapore leading law firm, attesting that these two guarantees were regularly issued in particular as regards their corporate interest and that they will be efficiently enforceable (together, the “First Demand Guarantees 1 and 2”).

[bold and italics in original]

The article went on to deal with the provision by Aluminium Dunkerque, as Guarantor 3, of a First Demand Guarantee 3 in like terms to the First Demand Guarantees 1 and 2, following its acquisition by LHG. It included a guarantee by LEG and LHG that Aluminium Dunkerque would give the guarantee.

The article concluded:

Renault will be allowed to call the First Demand Guarantees 1 and 2 simultaneously or one after the other, in any order, at Renault’s option, until full repayment of the Financial Support paid to the Purchaser. The First Demand Guarantee 3 will be enforceable by Renault if the Purchaser and/or the Guarantors 1 and 2 failed to perform their obligations within 10 business days after Renault’s demand.

As an exception to the above, the First Demand Guarantees 1, 2 and 3 will be enforceable simultaneously, in any order, at Renault’s option, until full repayment of the Financial Support paid to the Purchaser, in case the amount of the Financial Support already paid becomes immediately refundable by the Purchaser and the Guarantors.

Other articles, the detail of which does not matter, included forecasts for volumes of wheels ordered by Renault from AR Industries over 2019, 2020 and 2021, and prices for the wheels, with many qualifications as to both, including that the volume forecasts “do not entail any firm commitment from Renault in terms of effective volumes to be ordered to the Purchaser nor in terms of effective turnover to be achieved with the Purchaser” (in Article 6) and that without prejudice to the commitment to discuss in good faith neither the Purchaser nor any entity of its Group, or their managers and/or shareholders, would have any “recourse/claim of any kind against Renault … as regards (i) the level of volumes ordered by Renault from 2018 onwards …” (in Article 14). Article 6 included, however, a commitment by the Parties (as to Parties see [12] below) to negotiate in good faith towards compensation if the level of the volume forecasts was not achieved.

Article 13 stated a number of commitments of the Purchaser “[a]s a counterpart of Renault’s commitments”. Some were administrative (for example, to provide annual accounts) or aspirational (for example, to make best efforts to become fully competitive within three years, and to develop a relationship of trust with Renault). Others had potential significance, such as to maintain a level of performance in terms inter alia of quality, logistics, process, costs, engineering and lead times in order to meet Renault’s purchasing terms and conditions, and “[t]o ensure deliveries to [Renault] in accordance with the volumes ordered, and delivery lead times”.

In Article 1 the parties to the FSA were stated as Renault, LEG and LHG, and they were the only signatories to the FSA. Article 1 included at its end, however, “The Car Manufacturer [ie, Renault], the Purchaser and the Guarantors 1 and 2 being hereafter referred to, collectively, as ‘the Parties’ and individually as ‘a Party’”, and the FSA included many commitments (the term generally used) of the Purchaser (Article 5 as to repayment and Article 13 being some, but there were more) and commitments of the Parties. As next described, in the event the Purchaser was not LEG but an entity controlled by LEG, the Purchaser would therefore not be a signatory to the FSA. The FSA was expressed to be governed by French law. Whether by French law such a Purchaser would be bound under the FSA to make the Article 5 repayments was raised in the course of the hearing (see [51] below).

The Guarantee

It was common ground that the Guarantee was given by LEG as First Demand Guarantee 2 pursuant to the agreement to do so in Article 10 of the FSA. What happened about the giving of First Demand Guarantees 1 and 3 was not explained. It was also common ground (and was evident in the Guarantee) that by the time the Guarantee was given the operations and assets of AR Industries had been purchased by Liberty Wheels France, a French company in the Liberty Group (and I take it one controlled by LEG), and that it became the Purchaser as referred to in the FSA.

The parties to the Guarantee were LEG, entitled and defined as Guarantor, and Renault, entitled and...