Affert Resources Pte. Ltd. (In Court Compulsory Winding Up) v Industries Chimiques Du Senegal and another

Affert Resources Pte Ltd, a Singapore company now in compulsory liquidation, had acted as a middleman supplying sulphur to Industries Chimiques du Senegal (ICS), a Senegalese fertiliser producer. Affert, ICS and Senfer Africa Limited (which held 66% of ICS) were all part of the Archean Group, controlled by the Pendurthi family. ICS owed Affert a balance of US$17,007,263.60 under six sulphur contracts.

By 2014 ICS was in serious financial difficulty. On 20 August 2014 Indorama Holdings BV bought Senfer's 66% stake under an Acquisition Agreement made up of three documents: a share transfer agreement (US$11m to Senfer), an assumption of debt agreement (US$30m to Senfer's creditor banks), and a side letter under which Indorama would cause ICS to pay US$9m to Senfer's order in full settlement of ICS's related-party debts, provided the related parties confirmed this. In a letter of 7 October 2014 Affert confirmed that it would not claim the US$17,277,886 shown in ICS's books (the Waiver). ICS then paid US$8,001,886 to Senfer's order, and Indorama later injected capital to rehabilitate ICS.

Affert was placed in compulsory liquidation on 18 September 2017. In Originating Summons No 544 of 2019 it sought to set aside the Waiver as a transaction at an undervalue under s 98 of the Bankruptcy Act read with s 329 of the Companies Act, and asked for a payment order against ICS and Indorama. The High Court judge in [2024] SGHC 57 found a transaction at an undervalue but declined the remedies. Affert appealed in Civil Appeal No 27 of 2024.

1. Whether the relevant transaction for s 98 of the Bankruptcy Act was the Waiver alone or the wider arrangement around the Acquisition Agreement.
2. Whether that transaction was at an undervalue, comparing the value Affert gave with the value it received.
3. Whether, had there been a transaction at an undervalue, a payment order against ICS or Indorama would have been appropriate.

On the first issue, the court held that the Waiver was not the relevant transaction. The statutory definition of transaction includes any arrangement, and a corpus of linked agreements made for a common purpose can be one transaction even if the parties differ, drawing on Velstra Pte Ltd v Dexia Bank NV [2005] 1 SLR(R) 154 and English cases including Feakins, Brewin Dolphin and El-Husseiny. The common purpose here was the sale of Senfer's shares in ICS to Indorama. Senfer and Archean Industries had undertaken to procure the related parties' confirmations, and Affert's counsel accepted the Waiver was issued under the side letter. So the transaction was the whole arrangement built around the Acquisition Agreement, of which Affert was a part.

On the second issue, the court agreed with the judge that the Waiver took effect on 7 October 2014, when the sum was stated; the 1 October email did not fix the amount. After deducting invoices already time-barred under Senegalese law and the Transfert invoice settled by an earlier agreement, at most US$8,449,007.60 could be waived. Affert's subjective reasons for not suing were irrelevant, but ICS's finances were not: a debt should be valued at its likely recoverable value, not its face value. ICS was balance sheet insolvent even on Affert's own figure of negative US$89m, and had defaulted on most of its loans, so recovery was unlikely. On the other side, payments to MTG and Senfer Jersey, with whom Affert had significant dealings, benefited Affert, and MTG in fact settled Affert's debt to Transfert. The judge erred in placing the burden on the respondents: as applicant, Affert had to prove both what it gave and what it received, and it had not done so. There was therefore no transaction at an undervalue under either s 98(3)(a) or s 98(3)(c).

On remedies, which did not need deciding, the court made provisional observations. Any benefit to Indorama was only incidental to its position as shareholder. A payment order against ICS would raise serious problems: the Acquisition Agreement would have to be unwound years later, the order would leave Affert better off than before by sidestepping limitation periods, and in the counterfactual Affert would simply be an unsecured creditor of an insolvent company.

The Court of Appeal dismissed the appeal. It departed from the judge's finding that there was a transaction at an undervalue, holding that Affert had not shown the value it received under the arrangement was significantly less than the value it gave. Costs were awarded to the respondents fixed at $55,000 inclusive of disbursements, with the usual consequential orders.