LAVRENTIOS LAVRENTIADIS v DEXTRA PARTNERS PTE LTD

Facts

Dextra Partners Pte Ltd was a licensed foreign law practice in Singapore. Its sole shareholder and director, Mr Bernhard Wilhelm Rudolf Weber, and the company had been held jointly and severally liable in HC/S 106/2018 to pay Mr Lavrentios Lavrentiadis €17.2m plus interest and costs, and the Court of Appeal later added further sums against Mr Weber. Mr Weber was made bankrupt on his own application on 22 April 2021 in HC/B 767/2021, and the company was wound up on Mr Lavrentiadis's application on 27 August 2021 in HC/CWU 135/2021.

Mr Lavrentiadis was by far the largest creditor of both estates, owed S$24,915,157.86 by the company (77.33% of the proofs received) and 98.78% of the proofs in the bankruptcy. The liquidators and the trustee in bankruptcy wanted to investigate the affairs of the company and the bankrupt jointly, and Mr Lavrentiadis agreed to fund this and any resulting claims. In return, the recoveries would go first to the estates' costs, then to repay him the amount funded, then to pay him up to two times that amount, with any surplus returned to the estates. The agreement required court approval. The liquidators and the trustee each applied for authority to enter it; because the funder sat on the company's committee of inspection, the liquidators also sought permission for him to buy company assets and sanction for him to profit.

Issues

1. Whether the court should authorise the liquidators to assign the fruits of the company's pre-insolvency and statutory claims to the funder
2. Whether the funder, as a member of the committee of inspection, should be permitted to purchase company assets and to profit under the agreement
3. Whether the trustee in bankruptcy should be authorised to enter the same funding agreement

Holding

The High Court (Chua Lee Ming J) granted the applications and allowed the orders sought. It authorised the liquidators and the trustee to enter the funding agreement with each other, the company and the funder, gave permission under reg 37 for the funder to purchase the company's property and sanctioned under reg 39(1) his deriving a profit. The alternative grounds relying on s 144(1)(c) and s 378(g) and (h) of the Insolvency, Restructuring and Dissolution Act were rejected as inapplicable.

Reasoning

A liquidator may sell the fruits of pre-insolvency claims under s 144(2)(b) of the Act, following Re Vanguard Energy Pte Ltd [2015] 4 SLR 597, and assign the proceeds of statutory claims under s 144(1)(g) with authorisation. The court weighs good faith, the interests of the company and creditors, public policy and consistency with written law.

There was no reason to doubt the liquidators' good faith: the assets were insufficient, investigations were needed and the funder was the only one willing to pay. A return of up to two times the amount funded was reasonable, given evidence that funders typically gain between 0.5 and 3.5 times, with higher multiples where unidentified claims are being investigated, and the funder bore the risk of losing everything. Any cross-subsidy of the bankruptcy estate was acceptable because the company had been found to be the bankrupt's alter ego, so a joint inquiry made practical sense.

Maintenance and champerty do not apply to statutory powers of sale, but their policy concerns remain relevant. They were met because the liquidators kept control over which claims to bring, settle or discontinue, subject to the committee's approval or consultation. That the claims were not yet identified did not prevent authorisation. Fair terms satisfied both the rule against committee members buying assets and the rule against their profiting. The agreement was not a compromise with creditors under s 144(1)(c). The same reasoning applied to the trustee, who may sell the bankrupt's property, including the fruits of claims.

From the judgment