Case: POA Recovery v Yau Kwok Seng [2022] SGHC(A) 2 – Special Purpose Vehicle assigned claims has locus standi

Significant decision by the Appellate Division of the High Court of Singapore: POA Recovery v Yau Kwok Seng [2022] SGHC(A) 2

The Court held that a special purpose vehicle (SPV) who was assigned the claims of various investors who alleged fraud has locus standi to pursue the claims.

An issue arose as to whether the claims which were retrospectively assigned after the date of the writ are permissible. However, the court considered itself bound by the Court of Appeal decision in The Jarguh Sawit [1997] 3 SLR(R) 829, which permitted such claims, although the reasoning and authorities cited was doubted later in BXH v BXI [2020] 1 SLR 1043 (CA).

The Court held that this SPV scheme did not violate the rules on maintenance and champerty. The public policy principles underlying those doctrines to protect the purity of justice and the interest of vulnerable litigants were violated by use of an SPV per se. There was no element of impropriety: no surreptitious third-party funder controlling proceedings or third-party wagering on the litigation.

Indeed, the Court considered that this approach may be practicably more efficient than having a representative action (O 15 r 12) or filing multiple writs and then consolidating the actions (O 15 r 4).

The other concern of the SPV cost-proofing itself could be addressed by way of security for costs.

Even if the rules on maintenance and champerty are triggered, the exception in Re Vanguard Energy Pte Ltd [2015] 4 SLR 597 (HC) probably applies. Considering the totality of the circumstances here, the SPV was formed solely for the genuine commercial interest of being a convenient tool to pursue the investors’ claims.

On the facts, however, the Court dismissed the claim for fraud.

Also, the Court took a minor issue with the various deeds of assignment not actually being adduced in the documentary evidence or record of appeal.

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