SW Trustees v Teodros Ashenafi: Avoidance of Undervalue Transactions & Director's Duties

SW Trustees Pte Ltd (in compulsory liquidation), with Farooq Ahmad Mann as liquidator, sued Teodros Ashenafi, Sino Africa Trading Ltd, and Coca-Cola Sabco (East Africa) Ltd in the General Division of the High Court of Singapore, alleging undervalue transactions, breach of director's duties, and conspiracy. The court, presided over by Hri Kumar Nair J, heard the case on various dates in September, October, and November 2024, delivering judgment on 16 December 2024. The court found Sino Africa and Teodros Ashenafi liable for the SWE Share Transfer, a transaction at an undervalue, and for conspiracy. The action against Coca-Cola Sabco was dismissed.

1. Case Overview

1.1 Court

General Division of the High Court

1.2 Outcome

Judgment for Plaintiff against Sino Africa and Teodros Ashenafi; Action against Coca-Cola Sabco (East Africa) Ltd Dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Liquidator's attempt to unwind transactions and seek damages for breach of fiduciary duties and conspiracies. Judgment on undervalue transactions.

1.7 Decision Date

15 December 2024

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
SW Trustees Pte Ltd (in compulsory liquidation)	Plaintiff	Corporation	Partial Judgment for Plaintiff	Partial	Isaac Tito Shane of Tito Isaac & Co LLP Sindhu Nair d/o Muralidharan Nair of Tito Isaac & Co LLP Lim Chu Yech of Tito Isaac & Co LLP
Farooq Ahmad Mann	Plaintiff	Individual	Partial Judgment for Plaintiff	Partial	Isaac Tito Shane of Tito Isaac & Co LLP Sindhu Nair d/o Muralidharan Nair of Tito Isaac & Co LLP Lim Chu Yech of Tito Isaac & Co LLP
Teodros Ashenafi Tesemma (also known as Tewodros Ashenafi)	Defendant, Third Party	Individual	Judgment Against Defendant	Lost
Cheng Ka Wai	Defendant	Individual	Action Discontinued	Dismissed
Chooi Kok Yaw	Defendant	Individual	Action Discontinued	Dismissed
Alexander Ressos	Defendant	Individual	Action Discontinued	Dismissed
Sino Africa Trading Ltd	Defendant	Corporation	Judgment Against Defendant	Lost
Coca-Cola Sabco (East Africa) Ltd	Defendant	Corporation	Action Dismissed	Dismissed	Naomi Lim Bao Bao of Rajah & Tann Singapore LLP Zhu Ming-Ren Wilson of Rajah & Tann Singapore LLP

3. Judges

Judge Name	Title	Delivered Judgment
Hri Kumar Nair	Judge of the High Court	Yes

4. Counsels

Counsel Name	Organization
Isaac Tito Shane	Tito Isaac & Co LLP
Sindhu Nair d/o Muralidharan Nair	Tito Isaac & Co LLP
Lim Chu Yech	Tito Isaac & Co LLP
Naomi Lim Bao Bao	Rajah & Tann Singapore LLP
Zhu Ming-Ren Wilson	Rajah & Tann Singapore LLP

4. Facts

SWT was wound up on 21 June 2019.
Mr. Mann was appointed as the liquidator of SWT upon its winding up.
Mr. Ashenafi was a director of SWT from 1 September 2004 to 1 August 2017.
Mr. Ashenafi was the sole shareholder of SWT from 30 May 2016 to 27 February 2018.
SWT transferred 39,957 shares in SWE to Sino Africa on 28 April 2017 for no consideration.
CCSEA purchased SWT’s 16.75% minority stake in AIHL for US$10,796,784.
CCSEA made payments to SBM, Wealth Direct, Long River, and AIHL, and assumed liabilities of SWD, totaling US$10,796,784.

5. Formal Citations

SW Trustees Pte Ltd (in compulsory liquidation) and another v Teodros Ashenafi Tesemma (also known as Tewodros Ashenafi) and others, Suit No 229 of 2021, [2024] SGHC 322

6. Timeline

Date	Event
2004-09-01	Teodros Ashenafi Tesemma became a director of SW Trustees Pte Ltd.
2008-01-01	SGI Creditors purchased shares in Southwest Energy (BVI) Ltd.
2009-12-11	Cheng Ka Wai became a director of SW Trustees Pte Ltd.
2011-03-01	Gabriel David Gottlieb Schulze was appointed to the boards of SWE (BVI) and SWE (HK).
2011-07-31	Chooi Kok Yaw became SWT’s corporate secretary.
2012-10-10	Chooi Kok Yaw became a director of SW Trustees Pte Ltd.
2013-02-01	Gabriel David Gottlieb Schulze resigned from his directorships.
2014-01-01	The Coca-Cola Company, SABMiller plc, and Gutsche Family Investments Proprietary Ltd entered an agreement to consolidate bottling operations.
2014-11-07	SGI Creditors and Gabriel David Gottlieb Schulze entered a share purchase agreement with SWT.
2015-02-07	SWT was to pay the purchase price for shares in SWE (BVI), although this could be postponed by up to 30 days.
2015-05-27	PPESA notified SABMiller Group that it wished to sell its 33% stake in Ambo Min.
2015-06-19	SABMiller Group confirmed its interest for AIHL to acquire PPESA’s 33% minority stake in Ambo Min.
2015-07-03	AIHL informed PPESA that the purchase price would be paid after the execution of a share purchase agreement.
2016-03-07	SGI Creditors commenced arbitration proceedings against SWT.
2016-07-02	Completion of Project Savannah.
2016-12-15	Contract of sale between AIHL and MoPE.
2016-12-01	AIHL successfully completed its purchase of MoPE’s 33% stake in Ambo Min.
2017-03-23	Share Purchase Agreement dated.
2017-03-28	CCSEA transferred the sum of US$4,375,000 to a bank account with Standard Bank (Mauritius) Ltd in the name of SWT.
2017-03-29	SBM confirmed that SWT’s indebtedness to it under a term loan facility was fully and finally discharged.
2017-03-29	SGI Creditors, SWT, Mr Ashenafi and Mr Schulze entered a settlement agreement.
2017-03-31	CCSEA purchased SWT’s 16.75% minority stake in AIHL.
2017-03-31	Addendum to Share Purchase Agreement dated.
2017-04-01	CCSEA transferred the sum of US$4,543,759 to a bank account with the Hongkong and Shanghai Banking Corp in the name of Wealth Direct Ltd.
2017-04-01	CCSEA transferred the sum of US$755,511 to a bank account with HSBC in the name of Long River Holdings (HK) Ltd.
2017-04-01	CCSEA transferred the sum of US$43,047 to AIHL to discharge a debt owed by SWT to AIHL.
2017-04-01	CCSEA assumed the liabilities of US$1,079,467 owed by one Southwest Development plc to Ambo Min.
2017-04-28	SWT transferred 39,957 of its shares in SWE to Sino Africa.
2017-07-21	A final award was issued.
2017-10-09	The SGI Creditors applied for leave to enforce the Final Award against SWT in Singapore.
2017-10-10	Application to enforce the Final Award granted.
2017-10-24	SWT applied to set aside ORC 6562 and for a stay of proceedings by the SGI Creditors.
2017-11-01	Mr Ashenafi informed Mr Cheng that all assets of SWT belonged to SWDT.
2017-12-20	Application to set aside ORC 6562 and for a stay of proceedings dismissed.
2018-02-15	Mr Ashenafi asked Dr Ressos how assets could be added to a trust after it was formed.
2018-02-27	Mr Ashenafi transferred his shareholding in SWT to Satomi Services Ltd.
2018-04-23	The SGI Creditors served a statutory demand on SWT.
2018-08-13	Dr Ressos signed off on SWT's financial statements.
2018-07-03	The SGI Creditors applied to wind up SWT.
2019-06-21	Application to wind up SWT granted and Mr Mann was appointed as the liquidator of SWT.
2021-03-03	SWT commenced proceedings against all six defendants.
2022-05-18	Mr Mann was made a plaintiff to these proceedings.
2023-02-21	The action against Mr Cheng was discontinued.
2023-12-19	The action against Mr Chooi was discontinued.
2023-12-19	The action against Dr Ressos was discontinued.
2024-09-24	Trial began.
2024-12-16	Judgment delivered.

7. Legal Issues

Avoidance of Transactions at an Undervalue
- Outcome: The court found that the SWE Share Transfer was a transaction at an undervalue, but the AIHL Sale was not.
- Category: Substantive
- Sub-Issues:
  - Value of consideration given
  - Value of consideration received
  - Remedies
Breach of Director's Duties
- Outcome: The court found that Mr. Ashenafi breached his fiduciary duties in respect of the SWE Share Transfer and the unaccounted payment to Long River.
- Category: Substantive
Unlawful Means Conspiracy
- Outcome: The court found Mr. Ashenafi and Sino Africa liable for conspiracy in respect of the SWE Share Transfer.
- Category: Substantive

8. Remedies Sought

Declaration that the AIHL Sale was voidable
Damages for the difference between the consideration received and the market value of the Disposed AIHL Shares
Order that Mr Ashenafi and/or Sino Africa are jointly and/or severally liable to the plaintiffs for the sum of US$5,055,318

9. Cause of Actions

Avoidance of Transactions at an Undervalue
Breach of Director's Duties
Conspiracy

10. Practice Areas

Commercial Litigation
Insolvency Litigation

11. Industries

No industries specified

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Indian Overseas Bank v Svil Agro Pte Ltd	High Court	Yes	[2014] 3 SLR 892	Singapore	Cited for the power of the court to proceed with a trial on the merits, even in the absence of the defendant, and thereafter grant judgment on the merits if justified in doing so by the evidence.
Rothstar Group Ltd v Leow Quek Shiong	Court of Appeal	Yes	[2022] 2 SLR 158	Singapore	Confirmed that the applicable principles in relation to undervalue transactions remain largely unchanged even after the enactment of the IRDA.
Mercator & Noordstar NV v Velstra Pte Ltd (in liquidation)	High Court	Yes	[2003] 4 SLR(R) 667	Singapore	Cited for the elements that must be satisfied for a transaction to come within s 224 of the IRDA.
Parakou Shipping Pte Ltd (in liquidation) v Liu Cheng Chan	High Court	Yes	[2017] SGHC 15	Singapore	Cited for the approach that the correct approach is the determination of the market value of the subject asset.
Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd)	Court of Appeal	Yes	[2021] 2 SLR 478	Singapore	Cited for the sole test to determine whether a company is unable to pay its debts for the purposes of s 125(2)(c) of the IRDA is the cash flow test.
Living the Link (in creditors’ voluntary liquidation) and others v Tan Lay Tin Tina and others	High Court	Yes	[2016] 3 SLR 621	Singapore	Cited for the general approach in deciding what is the appropriate remedy where there has been transaction at an undervalue.
Re Thoars (decd) (No 2); Reid v Ramlort Ltd (No 2)	English Court of Appeal	Yes	[2005] 1 BCLC 331	England	Cited for the principle that consideration given to third parties by CCSEA, such as the payments to Wealth Direct and Long River, could be analogised to the £1,100 payment in Re Thoars.
Liquidator of W&P Piling Pte Ltd v Chew Yin What and others	High Court	Yes	[2004] SGHC 108	Singapore	Cited for the principle that a liquidator is an officer of the court and owes a higher duty to the court than to his or her clients.
EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and another	Court of Appeal	Yes	[2014] 1 SLR 860	Singapore	Cited for the elements that the plaintiffs must demonstrate to succeed in their claim for unlawful conspiracy.
Chew Kong Huat and others v Ricwil (Singapore) Pte Ltd	High Court	Yes	[1999] 3 SLR(R) 1167	Singapore	Cited for the principle that a breach of fiduciary duties is an unlawful act capable of grounding a claim in conspiracy.
Phillips v Brewin Dolphin Bell Lawrie Ltd	Unknown	Yes	[2001] 1 WLR 143	England	Cited for the approach that the correct approach is the determination of the market value of the subject asset.
Re Brabon, Treharne v Brabon	Unknown	Yes	[2001] BCLC 11	England	Cited for the approach that the correct approach is the determination of the market value of the subject asset.
Ailyan and anor v Smith and ors	Unknown	Yes	[2010] EWHC 24 (Ch)	England	Cited for the approach that the correct approach is the determination of the market value of the subject asset.
Stanley and anor v TMK Finance Ltd and anor	Unknown	Yes	[2010] EWHC 3349 (Ch)	England	Cited for the approach that the correct approach is the determination of the market value of the subject asset.
OMG Holdings Pte Ltd v Pos Ad Sdn Bhd	High Court	Yes	[2012] 4 SLR 231	Singapore	Cited for the principle that evidence given at trial can, where appropriate, overcome defects in the pleadings, provided that the other party is not taken by surprise or irreparably prejudiced.
Ong Han Ling and another v American International Assurance Co Ltd and others	Court of Appeal	Yes	[2018] 5 SLR 549	Singapore	Cited for the principle that a claimant will be entitled to (generally, compensatory) damages for a claim in conspiracy.
BIT Baltic Investment & Trading Pte Ltd (in compulsory liquidation) v Wee See Boon	High Court	Yes	[2023] 1 SLR 1648	Singapore	Cited for the principle that a director is a fiduciary of their company and has an overriding duty to act in good faith in the interests of the company.
DM Divers Technics Pte Ltd v Tee Chin Hock	High Court	Yes	[2004] 4 SLR(R) 424	Singapore	Cited for the principle that a director’s fiduciary duties to the company are: (a) the duty to act honestly and in good faith in the best interests of the company; (b) the duty not to exercise his powers for an improper purpose such as to profit personally from his office; and (c) the duty not to place himself in a position which will result in a conflict of interest between his duties to the company and his personal interests.

13. Applicable Rules

Rule Name
Rules of Court (2014 Rev Ed)

14. Applicable Statutes

Statute Name	Jurisdiction
Insolvency, Restructuring and Dissolution Act 2018	Singapore
Companies Act (Cap 50, 2006 Rev Ed)	Singapore
Bankruptcy Act (Cap 20, 2009 Rev Ed)	Singapore
Companies Act 1967 (2020 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Undervalue transaction
Fiduciary duty
Liquidator
Insolvency
Share transfer
AIHL Sale
SWE Share Transfer
Project Savannah
Settlement Agreement
Disposed AIHL Shares
Disposed SWE Shares

15.2 Keywords

Insolvency
Director duties
Undervalue transaction
Conspiracy
Liquidation

17. Areas of Law

Area Name	Relevance Score
Insolvency Law	90
Winding Up	85
Fiduciary Duties	70
Conspiracy by Unlawful Means	65
Director's Liability	60
Commercial Disputes	60
Corporate Law	40
Breach of Contract	30

16. Subjects

Insolvency Law
Company Law
Tort Law