Case Details
- Citation: [2018] SGHC 210
- Case Title: Solvadis Commodity Chemicals Gmbh v Affert Resources Pte Ltd
- Court: High Court of the Republic of Singapore
- Date of Decision: 28 September 2018
- Judge: Audrey Lim JC
- Case Number: Companies Winding Up No 17 of 2017 (Summons No 1959 of 2018)
- Coram: Audrey Lim JC
- Plaintiff/Applicant: Solvadis Commodity Chemicals Gmbh
- Defendant/Respondent: Affert Resources Pte Ltd
- Applicant’s Role in Proceedings: The application was brought by the Company via its liquidators for court approval of an assignment/sale arrangement.
- Parties (as described in the judgment): Affert Resources Pte Ltd (the “Company”); its liquidators (the “Liquidators”); Recovery Vehicle 1 Pte Ltd (“RV1”); Jakhau Salt Company Pte Ltd (“Jakhau”); and a litigation funder group associated with Oxford Investments Limited Partnership (“Oxford”).
- Counsel: Samuel Wee and Darrell Low (Yusarn Audrey) for the liquidators of Affert Resources Pte Ltd; Dominic Chan and Daniel Ng (Characterist LLC) for Solvadis Commodity Chemicals Gmbh; Joseph Lopez, Vanathi Eliora Ray and Intan Krishanty (Joseph Lopez LLP) for Jakhau Salt Company Pte Ltd; and Lee Ee Yang and Charis Wong (Covenant Chambers LLC) for Recovery Vehicle 1 Pte Ltd.
- Legal Areas: Contract — Illegality and Public Policy (maintenance and champerty); Insolvency Law — Winding Up (liquidator’s statutory power of sale/assignment).
- Legislation Referenced (as per metadata): Companies Act (Cap 50, 2006 Rev Ed); Bankruptcy Act (as referenced for “Act” definition); and provisions relating to assigned causes of action/receivables and the court’s control over liquidators’ exercise of powers.
- Judgment Length: 16 pages, 8,364 words
- Key Cases Cited: [2017] SGHC 216; [2018] SGHC 210 (as referenced in the introduction); Re Vanguard Energy Pte Ltd [2015] 4 SLR 597; Re Movitor Pty Ltd (rec and mgr apptd) (in liq) v Sims (1996) 19 ACSR 440; Re Van Der Velde (Liquidators), in the matter of Launcells Feedlot Systems Pty Ltd (in liq) [2014] FCA 1309.
Summary
Solvadis Commodity Chemicals Gmbh v Affert Resources Pte Ltd concerned a court application in compulsory winding up for approval of a litigation funding arrangement. The liquidators of Affert Resources Pte Ltd (“the Company”) sought the High Court’s approval to “sell and assign” certain property and choses in action to a special-purpose vehicle, Recovery Vehicle 1 Pte Ltd (“RV1”), under a draft Assignment Agreement. The assigned property comprised (i) specified receivables owed by third parties to the Company and (ii) causes of action against persons alleged to have conspired with, assisted, or participated in relation to the non-collection of those receivables.
The central tension was between enabling liquidators to realise value for creditors and preventing undue trafficking in litigation that could offend public policy, including the doctrines of maintenance and champerty. The objector, Jakhau Salt Company Pte Ltd (“Jakhau”), argued that the arrangement contravened public policy and that the liquidators would improperly relinquish control over litigation, contrary to the statutory requirement that the exercise of liquidators’ powers remains subject to the court’s control.
Applying the court’s supervisory role under the Companies Act, Audrey Lim JC held that the arrangement should be approved. The court accepted that the liquidators acted in good faith and that the agreement’s structure and safeguards mitigated the risks of trafficking in litigation. The court also treated the assignment as a statutory sale/assignment of choses in action rather than an impermissible champertous bargain, particularly given the limited scope of the assigned causes of action and the reporting and buy-back mechanisms.
What Were the Facts of This Case?
The Company was placed under compulsory liquidation on 18 September 2017 following an application by one of its creditors, Solvadis Commodity Chemicals Gmbh (“Solvadis”). In the liquidation, the Company’s liquidators identified potential recovery actions against debtors and/or persons connected with the non-collection of specified receivables. However, the liquidators considered that such recovery actions would be costly and that the Company lacked sufficient funds to pursue them.
At the Company’s first creditors’ meeting on 24 November 2017, the liquidators informed creditors that any potential recovery action would require funding beyond the Company’s available resources. They invited creditors to provide funding and also raised the possibility of third-party litigation funding. Several creditors rejected the proposal without offering alternative funding arrangements. Solvadis supported the application later, while other creditors did not object clearly; Jakhau ultimately became the principal objector and attended the hearing.
Jakhau approached the liquidators with alternative third-party financiers. In March 2018, Oxford Investments Limited Partnership (“Oxford”) incorporated RV1. The Company and RV1 executed the Assignment Agreement on 3 April 2018. Shortly thereafter, other litigation funders (Burford Capital and Harbour Litigation Funding) expressed interest but were told the agreement had already been executed; they declined to proceed further. The liquidators then brought the present application on 26 April 2018 for court approval of the agreement.
The Assignment Agreement allocated the assigned property into two categories. First, RV1 would receive the Company’s right to recover specified receivables due from named third parties (“Assigned Receivables”). Second, RV1 would receive the Company’s causes of action against persons alleged to have conspired with, assisted, or participated in connection with the Assigned Receivables and/or the non-collection of those receivables (“Assigned Causes of Action”). In return, RV1 paid an initial sum of S$50,000 and agreed to pay the Company a percentage of amounts recovered, after deducting costs and expenses. The agreement also included important restrictions and safeguards: it could not be further assigned by RV1; RV1 could not commence proceedings in the Company’s name or join the Company as a party; RV1 had to provide quarterly progress reports and cost breakdowns; and if RV1 did not commence enforcement or recovery actions within specified timeframes, the Company could buy back the assigned property for a nominal sum (S$1), with a longer period for the Assigned Causes of Action.
What Were the Key Legal Issues?
The application raised two principal legal questions under the Companies Act. First, under the statutory framework governing liquidators’ powers, the court had to decide whether it should approve the liquidators’ proposed sale/assignment of the Company’s property and choses in action to RV1. This required the court to consider the statutory conditions for approval, including the requirement that the liquidators’ exercise of their powers is subject to court control.
Second, the court had to address whether the arrangement offended public policy. Jakhau’s objection focused on the doctrines of maintenance and champerty, arguing that the arrangement amounted to “trafficking in litigation”. The argument was that RV1, as a special-purpose vehicle with no apparent independent means, would be maintained by Oxford, and that the structure could allow RV1 to monetise litigation in a way that undermined the integrity of the justice system.
Related to these issues was the question of control. Jakhau contended that the liquidators would completely relinquish control over the litigation to RV1, which would be inconsistent with the statutory requirement that liquidators’ powers remain under the court’s supervision. The court therefore had to evaluate whether the agreement’s reporting obligations and buy-back rights were sufficient to ensure that the liquidators did not abdicate their responsibilities to the court and creditors.
How Did the Court Analyse the Issues?
Audrey Lim JC began by situating the arrangement within the broader insolvency and litigation funding context. The court recognised that litigation funding arrangements can be beneficial in liquidation: they enable liquidators to pursue claims that would otherwise be abandoned due to lack of funds. The judgment referred to prior Singapore authority approving similar structures, including Re Vanguard Energy Pte Ltd [2015] 4 SLR 597, which concerned the assignment of the fruits of a cause of action. The court also noted the practical rationale described in Australian authority, where liquidators may otherwise have to forego claims because of insufficient resources.
However, the court emphasised that such arrangements also raise concerns that “strike fundamentally at the liquidator’s duties” to the court and creditors. The analysis therefore required a balancing exercise: enabling realisation of assets for creditors while preventing undue trafficking in litigation. The court treated this as a question of whether the arrangement should be approved under ss 273(3) and 272(2)(c) of the Companies Act, read with the court’s supervisory role under s 272(3).
On the maintenance and champerty objection, the court did not approach the issue as a mechanical “yes/no” based solely on the presence of a third-party funder. Instead, it examined the agreement’s design and the extent to which it resembled impermissible trafficking. The court was particularly attentive to the scope of the assigned causes of action. It noted that an earlier version of the agreement had included all causes of action, which gave the judge “some pause for concern”. The final version, however, limited the Assigned Causes of Action to those connected to the Assigned Receivables and the alleged conduct relating to non-collection. This narrowing reduced the risk that the arrangement would be used to acquire broad litigation interests untethered to the liquidation’s asset base.
In assessing good faith and the propriety of the liquidators’ decision-making, the court adopted a structured approach informed by Re Van Der Velde (Liquidators), in the matter of Launcells Feedlot Systems Pty Ltd (in liq) [2014] FCA 1309. The factors considered included: the circumstances under which the agreement was reached; whether the liquidators took into account creditors’ concerns and interests; and the degree of control relinquished by the liquidators. The court accepted that negotiations were conducted at arm’s length and that other funders proposed by Jakhau were unable to provide concrete alternatives. The court also considered the improvement over the status quo: without the agreement, the Company would likely recover nothing due to lack of funds.
The court further analysed costs allocation and risk. The agreement structured payments to the Company as a function of recoveries, with RV1 bearing the costs of recovery actions. This meant that creditors were not required to fund litigation directly through the arrangement. The judge also considered the reporting and oversight mechanisms. RV1 was required to provide quarterly updates and cost breakdowns to the liquidators, and the liquidators retained the ability to require additional information. Additionally, the buy-back provisions operated as a safeguard against prolonged inactivity: if RV1 did not commence enforcement or recovery actions within the specified periods, the Company could repurchase the assigned property for a nominal sum.
On the control issue, the court addressed Jakhau’s submission that the liquidators would completely relinquish control. The judge’s reasoning reflected the statutory nature of the liquidators’ power of sale/assignment. While s 272(3) subjects the exercise of powers to court control, the court did not interpret this as requiring liquidators to retain day-to-day conduct of litigation after assignment. Instead, the question was whether the agreement preserved sufficient oversight and aligned with the liquidators’ duties. The reporting obligations, the restrictions on RV1’s procedural conduct (including the prohibition on commencing proceedings in the Company’s name or joining the Company), and the inability to further assign the assigned property to third parties were all treated as relevant mitigants.
Finally, the court addressed the “trafficking” concern about RV1’s ability to assign the assigned property onward. Jakhau’s initial objection was that RV1 could assign the assigned property to third parties without legitimate interest in the litigation, enabling trafficking. The judgment indicates that this point became irrelevant because the agreement was amended to prevent further assignment by RV1. This amendment supported the conclusion that the arrangement was not designed to facilitate a secondary market in litigation interests detached from the liquidation’s legitimate recovery objectives.
What Was the Outcome?
The High Court approved the liquidators’ application for court approval of the Assignment Agreement. In practical terms, this meant that the Company’s liquidators were authorised to proceed with the sale and assignment of the specified receivables and the limited, connected causes of action to RV1, enabling RV1 to pursue recovery efforts on the agreed terms.
The approval also confirmed that, on the facts, the arrangement struck an acceptable balance between creditor value realisation and public policy concerns. The court’s decision therefore permitted the litigation funding structure to operate within the insolvency framework, subject to the agreement’s safeguards and the court’s supervisory oversight inherent in the approval process.
Why Does This Case Matter?
Solvadis v Affert Resources is significant for practitioners because it provides a Singapore High Court’s practical framework for assessing litigation funding arrangements in liquidation. While Singapore courts have previously approved similar structures, this case clarifies how the court will scrutinise the scope of assigned claims, the allocation of costs and risk, and the extent of oversight retained by liquidators.
For insolvency practitioners and litigation funders, the decision highlights drafting and process points that can be decisive. Narrowing the assigned causes of action to those connected with the liquidation’s specific receivables reduces public policy risk. Prohibiting further assignment by the funder vehicle limits trafficking. Procedural restrictions (such as not joining the company or suing in the company’s name) and robust reporting obligations help demonstrate that the liquidators have not abdicated their duties. Buy-back provisions provide a further safeguard against indefinite “warehousing” of claims.
For law students and litigators, the case also illustrates how the court integrates public policy doctrines (maintenance and champerty) into a statutory insolvency context. Rather than treating third-party funding as inherently suspect, the court focuses on whether the arrangement is structured to serve the liquidation’s legitimate purpose and whether the liquidators act in good faith while taking creditors’ interests into account. This approach is likely to influence future applications under the Companies Act where liquidators seek approval for assignments of choses in action to third parties.
Legislation Referenced
- Companies Act (Cap 50, 2006 Rev Ed), including ss 272(2)(c), 272(3), and 273(3)
- Bankruptcy Act (as referenced in the metadata for the definition of “Act” and related concepts)
- Provisions relating to assigned causes of action/assigned receivables and the court’s control over liquidators’ exercise of powers
- Companies Act provisions concerning the ability of a company to buy back assigned receivables/assigned causes of action for a nominal sum upon specified conditions
Cases Cited
- Re Vanguard Energy Pte Ltd [2015] 4 SLR 597
- Re Movitor Pty Ltd (rec and mgr apptd) (in liq) v Sims (1996) 19 ACSR 440
- Re Van Der Velde (Liquidators), in the matter of Launcells Feedlot Systems Pty Ltd (in liq) [2014] FCA 1309
- [2017] SGHC 216
- [2018] SGHC 210
Source Documents
This article analyses [2018] SGHC 210 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.