Solvadis Commodity Chemicals Gmbh v Affert Resources Pte Ltd
Jurisdiction | Singapore |
Judge | Audrey Lim JC |
Judgment Date | 28 September 2018 |
Neutral Citation | [2018] SGHC 210 |
Published date | 05 October 2018 |
Date | 28 September 2018 |
Year | 2018 |
Hearing Date | 08 May 2018,02 July 2018,29 August 2018 |
Plaintiff Counsel | Samuel Wee and Darrell Low (Yusarn Audrey) |
Defendant Counsel | Dominic Chan and Daniel Ng (Characterist LLC),Joseph Lopez, Vanathi Eliora Ray and Intan Krishanty (Joseph Lopez LLP),and Lee Ee Yang and Charis Wong (Covenant Chambers LLC) |
Court | High Court (Singapore) |
Citation | [2018] SGHC 210 |
Docket Number | Companies Winding Up No 17 of 2017 (Summons No 1959 of 2018) |
This case concerns a litigation funding arrangement. Specifically, it concerns an arrangement whereby a liquidator assigns the causes of action of a company undergoing liquidation to a third party litigation funder. Similar arrangements have been approved by our courts (see
How then should the court strike a balance between enabling liquidators to fully realise a company’s assets and preventing undue trafficking in litigation? Under what circumstances should the court approve such arrangements under the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”)? These are the principal questions arising in this application under ss 273(3) and 272(2)(
The Company was placed under compulsory liquidation on 18 September 2017, pursuant to an application by one of its creditors, Solvadis Commodity Chemicals Gmbh (“Solvadis”). The Liquidators seek the court’s approval under s 273(3) of the Act to sell and assign certain properties and things in action of the Company to one Recovery Vehicle 1 Pte Ltd (“RV1”) under s 272(2)(c) of the Act, pursuant to a draft Assignment Agreement between the Company and RV1 filed on 13 July 2018 (“the Agreement”).
Terms of the Agreement I begin by setting out the terms of the Agreement, under which the Company will assign two categories of rights (“Assigned Property”) to RV1:
In return for the Assigned Property (comprising the Assigned Receivables and Assigned Causes of Action), RV1 will pay to the Company an initial price of S$50,000.3 RV1 will thereafter pay the Company 40% of the first US$10m that it recovers, and 50% of any further sums recovered (less costs and expenses incurred for the recovery process). Such payment will take place within 30 days of RV1 receiving those sums (or part of the sums).4
For present purposes, the other salient terms of the Agreement are as follows:
I now set out the facts leading to the execution of the Agreement.
In November 2017, the Liquidators were introduced to Oxford Investments Limited Partnership (“Oxford”) by Solvadis. Oxford proposed having the Assigned Property assigned to it (or to a special-purpose vehicle designated by Oxford) for it to take control of the recovery of the Assigned Property in return for a portion of any sums that it successfully recovers.9
On 24 November 2017, at the Company’s first creditors’ meeting, 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 to fund any potential action. The Liquidators also invited the creditors to provide funding for the Company’s recovery actions and informed them about the possibility of third party litigation funding and Oxford’s proposal.10 Several of the Companies’ creditors rejected the proposal without providing any suggestions as to how the Company could otherwise procure funding.11 One of the Company’s creditors, Jakhau Salt Company Pte Ltd (“Jakhau”) eventually approached the Liquidators and informed them that it had identified a few alternative third party financiers.12
In March 2018, Oxford incorporated RV1,13 and the Company and RV1 executed the Agreement on 3 April 2018.14 Shortly thereafter, the Liquidators were contacted by two companies, Burford Capital and Harbour Litigation Funding. These companies were in the business of providing third party litigation funding, and they were desirous of finding out more about the Company. But the Liquidators informed them that the Agreement had been executed, and the companies declined to pursue the matter further. As things turned out, it was Jakhau that had referred these companies to the Liquidators.15
Subsequent to the execution of the Agreement, the Company took out this application (Summons 1959 of 2018) on 26 April 2018. Of the Company’s ten creditors,16 only Solvadis expressed clear support of the application while three other creditors have not raised any objections. The remaining six creditors (including Jakhau) expressed objections to the Agreement, but only Jakhau attended the summons hearing before me to oppose the Company’s application to approve the Agreement.
Parties’ cases Liquidators’ case In seeking the court’s approval, the Liquidators acknowledged that their power to sell or assign a company’s property is subject to the court’s control by virtue of s 272(2)(
In this connection, the Liquidators argued that the Agreement had been reached in good faith, and that the factors in
The Liquidators submitted that the court should look at the amount of costs likely to be incurred in the conduct of the action and the extent to which the funder is to contribute to the Company’s and opponent’s costs incurred in the recovery process, including the scenario where the action is unsuccessful. The Liquidators further submitted that because the Agreement amounts to an outright sale to RV1 of the Company’s Assigned Property, RV1 will bear the costs of any recovery action.21 There will also be no prejudice to the creditors because anything recovered by RV1 will be distributed to the creditors “based on the percentages they hold” as creditors.22
With respect to the amount of control that they will maintain over the Company’s litigation, the Liquidators argued that they are entitled to relinquish control as a corollary of assigning the Company’s causes of action because s 272(2)(
Jakhau objected to the application. It submitted that the Agreement should not be approved because it contravenes the policy against maintenance and champerty, and pointed out that RV1 (a special purpose vehicle with no discernible assets to pursue the Company’s causes of actions)25 will itself be maintained by Oxford.26 It also highlighted that the Agreement allows RV1 to assign the Assigned Property to third parties that may have no legitimate interest in the Company’s litigation against its debtors, and thus enable RV1 to engage in “trafficking in litigation”, which is contrary to public policy.27 However, this...
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