POA Recovery Pte Ltd v Yau Kwok Seng
| Jurisdiction | England & Wales |
| Judge | Belinda Ang Saw Ean JAD,Woo Bih Li JAD,Quentin Loh JAD |
| Judgment Date | 03 February 2022 |
| Court | High Court |
| Docket Number | Civil Appeals Nos 26 and 34 of 2021 |
[2022] SGHC(A) 2
Belinda Ang Saw Ean JAD, Woo Bih Li JAD and Quentin Loh JAD
Civil Appeals Nos 26 and 34 of 2021
Appellate Division of the High Court
Contract — Illegality and public policy — Maintenance and champerty — Maintenance and champerty as principles of public policy — Whether claims brought through special purpose vehicle fell foul of rules on maintenance and champerty — Whether claimants cost-proofed
Tort — Misrepresentation — Fraud and deceit — Fraudulent misrepresentation — Tort of deceit — Marketing agents — Whether marketing agents fraudulently misrepresented nature of investment — Whether marketing agents complicit in principal's alleged fraud
Held, dismissing the appeals:
AD 26
Inadequacy of pleadings
(1) POA Recovery did not adequately plead its causes of action apart from fraud and fraudulent misrepresentation. POA Recovery inadequately pleaded its causes of action in negligence and breach of fiduciary duty and/or trust, as it amalgamated the factual bases of its claims. That approach might not be objectionable if done properly. But in this case, facts that constituted the specific elements to make up the individual causes of action were not particularised at all: at [62] to [67] and [72].
(a) On negligence, nothing in the Statement of Claim pointed clearly to the existence of a duty of care or established with specificity the standard of care that the respondents ought to have been held to. There was not even a tangential reference to meeting the threshold requirement of negligence: that of factual foreseeability. This lack of factual averment was fatal to POA Recovery's claim in negligence; factual foreseeability “is a threshold question which the court must be satisfied is fulfilled, failing which the claim does not even take off” [emphasis added]: at [65].
(b) Specificity in arguments (including the pleaded case) was of paramount importance in claims against agents for breach of trust and/or fiduciary duty. This was due to the inherently fact-sensitive nature of such duties, and how different circumstances would often shape the contours of the precise duties in question. Just because an agent might be considered a fiduciary in a limited manner did not mean that every duty the agent owed to the principal was a fiduciary duty. The onus was on a plaintiff (here, POA Recovery) to aver with specificity the precise duty owed, the scope of such duty, and the context in which it would apply. POA Recovery mentioned none of these in the Statement of Claim: at [66] and [67].
(2) Dishonest assistance and conspiracy were also not adequately pleaded. While the causes of action were expressly spelled out, nothing in the Statement of Claim alluded clearly to the facts in support of the elements of dishonest assistance or conspiracy. POA Recovery never explained how, in the context of the specific transactions in question, there could have been “assistance” that was “dishonest”. Nor did it identify the alleged co-conspirators, and simply averred that the respondents had conspired with “others yet unknown”. Having failed to do so, the state of POA Recovery's pleadings was self-evidently prejudicial to the respondents: at [68] to [71].
Assignment of causes of action to a special purpose vehicle to sue
(3) Notwithstanding that 889 of the 1,102 Investors' deeds of assignment were signed after the date of the writ of summons, all 1,102 deeds of assignment were allowed into evidence. The court was bound by the Court of Appeal's decision in The Jarguh Sawit[1997] 3 SLR(R) 829 (“Jarguh Sawit(CA)”), which stated that standalone retrospective assignments of causes of action after the date of commencement of a suit were valid where the claims had already accrued as at the date of the filing of the writ: at [76] to [83].
(4) Maintenance proceedings were defined as the giving of assistance or encouragement to one of the parties to a litigation by a person who had neither an interest in the litigation nor any other motive recognised by the law as justifying his interference. Maintenance was generally distinguished from its subset, champerty, that consisted of maintaining a civil action in consideration of a promise of a share in the proceeds if successful: at [86] and [87].
(5) Contrary to the Judge's view, POA Recovery did have locus standi to bring its claim. The rules on maintenance and champerty were not violated. The law on maintenance and champerty were principles of public policy designed to protect the purity of justice and the interest of vulnerable litigants. These fundamental considerations were not per se violated by the Investors' use of a special purpose vehicle (“SPV”) structure, without more. There was no accompanying element of impropriety, because there was no surreptitious third-party funder controlling proceedings, or any third-party wagering on the litigation. POA Recovery had always been controlled and funded by the Investors. POA Recovery would not itself have received any share in the proceeds of the litigation, and there was no evidence of any third-party financing or funding: at [88] to [90] and [100].
Fraud and fraudulent misrepresentation
(6) The principles undergirding a cause of action in fraud, and those relevant to a claim in fraudulent misrepresentation, were closely intertwined. In the context of the present case, the crux of the matter was whether the respondents were involved in a dishonest and fraudulent scheme with POA and COGI, in marketing the investments to the Investors. Both causes of action were accordingly considered at the same time, with reference to the elements of fraudulent misrepresentation. If POA Recovery succeeded in proving fraudulent misrepresentation, it would likewise have prevailed in its fraud claim: at [108].
(7) The court dismissed AD 26 as POA Recovery had not proven that the Scheme was a Ponzi scheme. The investments did bear the three key features of oil, profits and security.
(a) On the first key feature of oil, there was evidence that COGI was a legitimate oil producing company that operated oil and gas assets in Alberta, Canada. This was substantiated by key documents such as oil allocation documents, COGI's company profile, contracts with oil giants, and third-party valuations and audits from entities such as the Government of Alberta, renowned oil experts and reputable accounting firms. These showed that COGI and POA did in fact allocate barrels of crude oil to investors upon purchase: at [121] to [124].
(b) Investors also did receive profits (the second key feature) generated from the resale of oil. POA Recovery's argument that it was impermissible for investors' monies to be used for oil and gas asset acquisition, and for payment of other investors' profits, was not against the contractual structure of the BPOs which did not prohibit the use of investors' funds in this manner. While the evidence suggested that profits for investors were paid out partly from the resale of oil, and partly using new investors' moneys, this was permissible and not fraudulent. How POA chose to make payment of the exit amounts was an internal accounting arrangement. In so far as POA/COGI fulfilled its end of the bargain and provided the Investors with profits, and in so far as there were genuine sales of oil, it did not matter that the revenue from investors was utilised as working capital. Using new investors' funds to pay old investors would be a problem if an entire “business” scheme was built on solely or predominantly on such circular fund movements. But that was not the case here, as there were genuine and significant oil transactions: at [128] to [145].
(c) The investors also had valid security (the third key feature) for their investments, until February 2016 when certain securities were discharged without authority. Following the discharges, there was insufficient security. But this was the doing of COGI's and POA's officers in Canada, not the respondents. There was evidence that in the discharge of a certain security, Yau's signature had been forged. There was also evidence that COGI's and POA's officers kept Yau in the dark when the various securities were discharged, and only informed him after the fact. Importantly, in the face of these events, Yau maintained an honest disposition, and demanded that the investors be protected and secured. Yau's insistence that the investors' security be preserved was inconsistent with someone who was defrauding investors: at [150] to [154] and [178] to [196].
(8) Even assuming that COGI and POA were fraudulent throughout the duration of the alleged Scheme, Yau and the respondents were not complicit in this. The respondents were POA's marketing agents. They did not participate in the crude oil production and resale business – that was entirely POA's and COGI's domain. The respondents merely marketed the investments for a commission. The same could be said as regards POA and COGI's allegedly wrongful use of investors' moneys – it was not the respondents' responsibility as marketing agents to oversee how POA and COGI utilised the funds they received. The respondents' role was to market the investments, and nothing suggested that they would have been privy to matters that were essentially in the remit of COGI's higher management. Further, the documentary evidence showed that Yau and the respondents constantly sought to verify the legitimacy of the oil purchases, and offered this verified information to investors. There was no evidence that Yau and the respondents deliberately suppressed information to the detriment of investors: at [157] to [166].
(9) When things took a turn for the worse in October 2015 and COGI was put under receivership, the respondents' roles shifted from being marketers of the investments, to being involved in viably resuscitating the investments. Even at this juncture, there was nothing to suggest that...
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