Solvadis v Affert: Litigation Funding, Liquidator's Powers & Public Policy
In Solvadis Commodity Chemicals Gmbh v Affert Resources Pte Ltd, the High Court of Singapore considered an application by the liquidators of Affert Resources Pte Ltd to approve an agreement to sell and assign the company's properties and causes of action to Recovery Vehicle 1 Pte Ltd. The court, presided over by Audrey Lim JC, addressed whether such an assignment was permissible under the Companies Act, and whether it contravened the policy against maintenance and champerty. The court approved the agreement, finding it to be a statutory exception to the doctrine of maintenance and champerty and in the best interest of the creditors.
1. Case Overview
1.1 Court
High Court of Singapore1.2 Outcome
Agreement Approved
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court considers liquidator's assignment of causes of action to a third-party funder, balancing asset realization with preventing trafficking in litigation.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Recovery Vehicle 1 Pte Ltd | Other | Corporation | Agreement Approved | Won | |
| Solvadis Commodity Chemicals Gmbh | Plaintiff | Corporation | Application supported | Neutral | |
| Affert Resources Pte Ltd | Defendant | Corporation | Application Granted | Won | |
| Jakhau Salt Company Pte Ltd | Other | Corporation | Objection Dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Audrey Lim | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Affert Resources Pte Ltd was placed under compulsory liquidation on 18 September 2017.
- The Liquidators sought the court’s approval to sell and assign certain properties and things in action of the Company to Recovery Vehicle 1 Pte Ltd.
- The Assigned Property includes the Company’s right of recovery of receivables and causes of action against those who conspired with specified third parties.
- Recovery Vehicle 1 Pte Ltd will pay the Company an initial price of S$50,000 for the Assigned Property.
- Recovery Vehicle 1 Pte Ltd will pay the Company 40% of the first US$10m recovered and 50% of any further sums recovered.
- The Agreement cannot be further assigned to another person.
- The Liquidators informed the creditors that any potential recovery action against the Company’s debtors would be costly and that its current funds were insufficient.
5. Formal Citations
- Solvadis Commodity Chemicals GmbhvAffert Resources Pte Ltd, Companies Winding Up No 17 of 2017 (Summons No 1959 of 2018), [2018] SGHC 210
6. Timeline
| Date | Event |
|---|---|
| Company placed under compulsory liquidation | |
| Liquidators introduced to Oxford Investments Limited Partnership | |
| First creditors’ meeting held | |
| Oxford incorporated Recovery Vehicle 1 Pte Ltd | |
| Agreement executed between the Company and Recovery Vehicle 1 Pte Ltd | |
| Summons filed in High Court | |
| Draft Assignment Agreement filed | |
| Hearing date | |
| Hearing date | |
| Judgment issued |
7. Legal Issues
- Whether Section 272(2)(c) of the Companies Act permits the sale of a company’s right to the recovery of receivables due from its debtors as well as the company’s causes of action
- Outcome: The court held that Section 272(2)(c) of the Companies Act permits the sale of a company’s right to the recovery of receivables due from its debtors as well as the company’s causes of action.
- Category: Substantive
- Whether the doctrine of maintenance and champerty applies to a liquidator’s exercise of its power under Section 272(2)(c)
- Outcome: The court held that Section 272(2)(c) of the Companies Act is a statutory exception to the doctrine of maintenance and champerty.
- Category: Substantive
- What is the appropriate test to be applied and what are the matters to be considered by the court in approving a liquidator’s exercise of its power under Section 272(2)(c)
- Outcome: The court held that the overarching consideration should be whether the liquidator, in exercising those powers, is acting bona fide or in good faith.
- Category: Procedural
8. Remedies Sought
- Approval of the assignment agreement
9. Cause of Actions
- Conspiracy
- Fraud
- Knowing Receipt
- Dishonest Assistance
- Breach of Fiduciary Duties
- Restitution
- Trusts
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
- Corporate Restructuring
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re Vanguard Energy Pte Ltd | High Court | Yes | [2015] 4 SLR 597 | Singapore | Cited for the approval of similar arrangements involving the assignment of the fruits of a cause of action by a liquidator. |
| Van Der Velde (Liquidators), in the matter of Launcells Feedlot Systems Pty Ltd (in liq)) | Federal Court of Australia | Yes | [2014] FCA 1309 | Australia | Cited for the factors to consider in assessing the bona fides of agreements to sell a company's properties or choses in action. |
| Re Movitor Pty Ltd (rec and mgr apptd) (in liq) v Sims | Unknown | Yes | (1996) 19 ACSR 440 | Australia | Cited for the advantages of litigation funding arrangements from the perspective of liquidators. |
| Cant, In the matter of Novaline Pty Ltd (in liq) | Federal Court of Australia | Yes | [2011] FCA 898 | Australia | Cited to support the principle that a liquidator is statutorily empowered to assign a company's causes of action because they form part of its property. |
| Lim Lie Hoa and another v Ong Jane Rebecca | Court of Appeal | Yes | [1997] 1 SLR(R) 775 | Singapore | Cited for the definition of maintenance and champerty. |
| Leon v York-O-Matic Ltd | English High Court | Yes | [1966] 1 WLR 1450 | England | Cited for the principle that the court would not intervene with the liquidator’s exercise of his power unless what he was doing was “so utterly unreasonable and absurd that no reasonable man would so act”. |
| MWA Capital Pte Ltd v Ivy Lee Realty Pte Ltd (in liquidation) | High Court | Yes | [2017] SGHC 216 | Singapore | Cited for the proposition that the court would not intervene with the liquidator’s exercise of his power unless what he was doing was “so utterly unreasonable and absurd that no reasonable man would so act”. |
| Low Hua Kin v Kumagai-Zenecon Construction Pte Ltd (in liquidation) and another | Court of Appeal | Yes | [2000] 2 SLR(R) 689 | Singapore | Cited for the principle that the court should be slow to intervene in a liquidator’s commercial decision in circumstances where bad faith has not been shown. |
| Re Addstone Pte Ltd (in liq) | Federal Court of Australia | Yes | (1998) 83 FCR 583 | Australia | Cited for the principle that the court ought to be slow in interfering with a liquidator’s commercial decision where bad faith has not been established. |
| Jones, Saker, Weaver and Stewart (Liquidators), in the matter of Great Southern Limited (in liq) (Receivers and Managers Appointed) | Federal Court of Australia | Yes | [2012] FCA 1072 | Australia | Cited for the factors to be taken into account in ascertaining whether the liquidators have acted bona fide or in good faith. |
| Re Oasis Merchandising Services Ltd | Unknown | Yes | [1998] Ch 170 | England | Cited for the principle that rights of action vesting solely in a liquidator of a company in liquidation cannot be assigned or sold to a third party. |
| Neo Corp Pte Ltd (in liquidation) v Neocorp Innovations Pte Ltd | Unknown | Yes | [2006] 2 SLR(R) 717 | Singapore | Cited for the principle that rights of action vesting solely in a liquidator of a company in liquidation cannot be assigned or sold to a third party. |
| Manharlal Trikamdas Mody and another v Sumikin Bussan International (HK) Ltd | Unknown | Yes | [2014] 3 SLR 1161 | Singapore | Cited for the principle that rights of action vesting solely in a liquidator of a company in liquidation cannot be assigned or sold to a third party. |
| Re ACN 076 673 875 Ltd | Unknown | Yes | (2002) 42 ACSR 296 | Australia | Cited for the principle that the absence of alternative quotations for litigation funding does not preclude the court from approving the Agreement. |
| Buiscex Ltd and Another v Panfida Foods Ltd (in liq) | Supreme Court of New South Wales | Yes | (1998) 28 ACSR 357 | Australia | Cited for the approval of similar agreements under which the insolvent company was entitled to less than half of the recovered proceeds. |
| Ramsey v Hartley and others | English Court of Appeal | Yes | [1977] 2 All ER 673 | England | Cited for the principle that the promise by the assignee to pay the assignor 35% of the net proceeds of the action was good valuable consideration. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Companies Act 1948 (c 38) (UK) | United Kingdom |
| Bankruptcy Act (Cap 20, 2009 Rev Ed) | Singapore |
| Corporations Law 1989 (Cth) | Australia |
15. Key Terms and Keywords
15.1 Key Terms
- Liquidation
- Liquidator
- Assignment Agreement
- Assigned Property
- Assigned Receivables
- Assigned Causes of Action
- Maintenance
- Champerty
- Recovery Vehicle
- Third Party Litigation Funding
15.2 Keywords
- liquidation
- litigation funding
- assignment
- companies act
- maintenance
- champerty
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Winding Up | 95 |
| Insolvency Law | 90 |
| Liquidator | 80 |
| Liquidator’s statutory power of sale | 75 |
| Illegality and public policy | 70 |
| Maintenance and champerty | 65 |
| Contract Law | 50 |
| Director's Duties | 30 |
| Trust Law | 20 |
16. Subjects
- Insolvency
- Company Law
- Litigation Funding
- Civil Procedure