Case Details
- Citation: [2018] SGHC 257
- Title: Re Fan Kow Hin
- Court: High Court of the Republic of Singapore
- Date of Decision: 16 November 2018
- Judge: Aedit Abdullah J
- Coram: Aedit Abdullah J
- Case Number(s): Originating Summons (Bankruptcy) No 479 of 2017; Summons No 2898 of 2018
- Proceeding Type: Application for court sanction of third-party litigation funding in bankruptcy
- Applicant: Trustees in bankruptcy of the estate of Fan Kow Hin
- Respondent / Opposing Parties: Defendants to the clawback litigation (present as non-parties for the limited issues)
- Non-Parties: Defendants to the clawback claims, allowed by consent to make submissions on specific questions
- Counsel for the Applicant: Andrew Chan, Alexander Yeo, Chew Jing Wei (Allen & Gledhill LLP)
- Counsel for the Non-Parties: David Chan, Cai Chengying, Shirin Swah (Shook Lin & Bok LLP)
- Legal Area: Insolvency Law — Bankruptcy
- Key Themes: Third-party litigation funding; assignment of proceeds of insolvency clawback claims; maintenance and champerty; property of the bankrupt’s estate
- Statutes Referenced: Bankruptcy Act (Cap 20, 2009 Rev Ed); Civil Law Act (Cap 43, 1999 Rev Ed); Companies Act (Cap 50, 2006 Rev Ed); Criminal Law Act; Criminal Law Act 1967; Enterprise and Employment Act 2015
- Cases Cited: [2018] SGHC 257 (as referenced in metadata); In re Oasis Merchandising Services Ltd [1998] Ch 170; Neo Corp Pte Ltd (in liquidation) v Neocorp Innovations Pte Ltd [2006] 2 SLR(R) 717; Re Vanguard Energy Pte Ltd [2015] 4 SLR 597; Manharlal Trikamdas Mody and another v Sumikin Bussan International (HK) Ltd [2014] 3 SLR 1161; Buchler and another v Talbot and others [2004] 2 AC 298
- Judgment Length: 9 pages; 4,917 words
Summary
In Re Fan Kow Hin [2018] SGHC 257, the High Court considered whether trustees in bankruptcy could obtain the court’s sanction for a litigation funding arrangement that involved assigning a proportion of the proceeds of insolvency “clawback” litigation. The trustees were pursuing clawback claims under the Bankruptcy Act, including claims to avoid transactions at an undervalue and to recover unfair preferences. The defendants to that clawback litigation opposed the funding application, but were limited by consent to submissions on whether the fruits of such claims could be assigned and whether the proposed assignment would be champertous or an abuse of process.
The court allowed the application. Central to the decision was the interpretation of the Bankruptcy Act’s provisions on the composition of the bankrupt’s estate. The judge held that the proceeds of clawback claims under ss 98 and 99, as contemplated by s 102(4), form part of the bankrupt’s estate and are therefore capable of being treated as estate property. On that basis, the assignment of the proceeds was not contrary to public policy as maintenance and champerty, particularly given the insolvency context and the access-to-justice rationale for enabling the litigation to proceed.
What Were the Facts of This Case?
The proceedings arose from the bankruptcy of Fan Kow Hin. The trustees in bankruptcy (“the Trustees”) were conducting litigation in the High Court (High Court Suit No 1078 of 2017) against various defendants. The suit sought, among other things, orders under the Bankruptcy Act to unwind certain transactions and recover value for the benefit of creditors. These claims were commonly referred to as “clawback claims”, and they included claims related to transactions at an undervalue and unfair preferences.
As the clawback litigation progressed, the Trustees sought court approval for a funding arrangement. The funding application (brought by Summons No 2898 of 2018) concerned an agreement that would assign and sell a proportion of the benefits or proceeds of the clawback claims. In practical terms, the funding arrangement would allow a third party to receive a share of the recoveries if the clawback litigation succeeded, thereby providing funding to enable the litigation to be pursued.
The defendants to the clawback litigation opposed the funding application. However, by consent, the defendants were permitted to make submissions only on two specific questions: first, whether the fruits (proceeds) of insolvency clawback claims may be assigned; and second, whether such an assignment would be champertous or constitute an abuse of process. The merits of the funding arrangement itself, and the underlying merits of the clawback claims, were to be heard separately, without the involvement of the defendants as non-parties.
Accordingly, the court’s task in this application was not to decide whether the clawback claims were likely to succeed, but rather to determine whether the proposed assignment of proceeds could lawfully be sanctioned in the insolvency setting. This required the court to engage with the statutory scheme under the Bankruptcy Act, and also with the common law doctrines of maintenance and champerty, as well as the effect of legislative amendments to the Civil Law Act concerning third-party litigation funding.
What Were the Key Legal Issues?
The first key issue was whether the proceeds of the clawback claims under the Bankruptcy Act constitute property of the bankrupt’s estate. This question mattered because if the proceeds were part of the estate, the Trustees would have authority to deal with them as estate assets. The court therefore had to interpret the relevant provisions, particularly ss 78(1)(a) and 102(4), and to assess whether the statutory language brought the proceeds within the estate even though the clawback orders themselves would be made only after litigation.
The second key issue was whether assigning the proceeds of insolvency clawback litigation would be champertous or an abuse of process. The defendants’ position was that, notwithstanding the insolvency context, the assignment would offend public policy unless an exception applied. In support of their opposition, the defendants relied on the continuing relevance of the maintenance and champerty doctrines, and on prior Singapore authority that had addressed the interaction between insolvency office-holders’ powers and litigation funding.
Finally, the court had to consider the effect of the 2017 amendments to the Civil Law Act. Those amendments permitted third-party litigation funding only in specified contexts, notably international arbitration and related court and mediation proceedings. The defendants argued that outside those contexts, third-party funding remained constrained by the common law rules against maintenance and champerty, and that any development in the law on assignment of litigation proceeds should be left to Parliament.
How Did the Court Analyse the Issues?
The court began with statutory interpretation. The judge focused on the Bankruptcy Act’s provisions governing what constitutes the bankrupt’s estate and how sums recovered under clawback orders are treated. In particular, ss 78(1)(a) and 102(4) were central. Section 78(1)(a) provides that the property of the bankrupt divisible among creditors comprises property that belongs to or is vested in the bankrupt at the commencement of bankruptcy or is acquired by or devolves on him before discharge. The provision also reflects a broad approach to what may fall within the estate, including after-acquired property.
Section 102(4) then addressed the consequences of orders made under ss 98 and 99. It states that “any sums required to be paid to the Official Assignee in accordance with an order under section 98 or 99 shall be comprised in the bankrupt’s estate.” The judge treated this as a plain and direct legislative statement that the proceeds contemplated by ss 98 and 99, once an order is made, are part of the estate. The judge rejected the defendants’ attempt to narrow the provision by arguing that because no clawback orders had yet been made, the proceeds could not be treated as estate property.
In the judge’s view, the timing point did not undermine the statutory conclusion. It was accepted that the proceeds would only “obtain” after an order under ss 98 or 99 is made. However, that did not mean that the proceeds were not within the statutory scheme from the outset. Rather, the court held that ss 78(1)(a) and 102(4) together make clear that even property acquired post-bankruptcy can be property of the estate. The judge therefore concluded that the proceeds of the clawback claims were indeed property of the bankrupt’s estate.
Having determined that the proceeds were estate property, the court addressed the defendants’ reliance on Singapore cases such as Manharlal Trikamdas Mody and another v Sumikin Bussan International (HK) Ltd [2014] 3 SLR 1161 (“Sumikin”). The defendants had argued that certain rights under the Bankruptcy Act were personal to the Official Assignee and therefore incapable of assignment. The judge distinguished Sumikin on the basis that it concerned assignment of rights to enforce statutory moratoria (rights personal to the Official Assignee), rather than assignment of the proceeds of successful clawback litigation. In Re Fan Kow Hin, what was proposed to be assigned was not the right to sue under ss 98 and 99, but only the proceeds of any successful suit. The judge held that such proceeds could not properly be characterised as personal rights; they were assets forming part of the bankruptcy estate.
The court also considered the relevance of Neo Corp Pte Ltd (in liquidation) v Neocorp Innovations Pte Ltd [2006] 2 SLR(R) 717 (“Neocorp”). The Trustees had argued that Neocorp was distinguishable because it concerned the right to avoid transactions tainted with unfair preference, and because the case involved corporate insolvency under the Companies Act rather than the Bankruptcy Act. The judge’s reasoning, however, was anchored primarily in the text of the Bankruptcy Act, especially s 102(4), which expressly addressed the composition of the estate in relation to sums payable under clawback orders.
The most significant obstacle for the Trustees was the English decision in In re Oasis Merchandising Services Ltd [1998] Ch 170 (“Oasis”). The judge treated Oasis as authority for the proposition that fruits of a cause of action arising after insolvency are recoverable only by the liquidator under statutory powers and therefore do not form part of the company’s property in liquidation. Under that approach, alienation of such litigation proceeds for funding would be champertous and an abuse of process.
The Trustees urged the court not to follow Oasis, arguing that the distinction between pre- and post-insolvency property recognised in English law was not reflected in Singapore’s statutory framework, and that the distinction had been doubted or impliedly overruled in Buchler and another v Talbot and others [2004] 2 AC 298. They also argued that Oasis was confined to corporate insolvencies and that Australian authorities permitted assignment of proceeds of statutory claims.
The defendants, by contrast, emphasised that Oasis had been followed in Singapore, including by the Court of Appeal in Neocorp and by the High Court in Sumikin. They argued that the 2017 amendments to the Civil Law Act did not create a general exception for third-party funding; rather, they only permitted third-party funding for international arbitration and related court and mediation proceedings. They further argued that any development in the law on assignment of litigation proceeds should be left to Parliament, and that if the court were minded to permit the assignment, the criteria in Re Vanguard Energy Pte Ltd [2015] 4 SLR 597 (“Vanguard”) should be applied.
Although the excerpt provided is truncated before the court’s full engagement with Oasis and the Civil Law Act amendments, the court’s conclusion on the statutory question was decisive. The judge held that under the Bankruptcy Act, the fruits of the litigation are property of the estate and may be assigned by the trustees. This statutory characterisation addressed the underlying concern that the proceeds were not “property” but rather something akin to a personal right or a statutory power that could not be alienated. Once the proceeds were treated as estate property, the court held that the assignment was not contrary to public policy as champertous or in maintenance.
Importantly, the judge also relied on the access-to-justice rationale in the insolvency context. The court accepted that the assignment was aimed at providing access to justice where, in practice, no other viable option for litigation funding existed. This reasoning aligns with the broader Singapore approach that maintenance and champerty doctrines should not be applied mechanically where the arrangement serves legitimate insolvency administration and creditor interests, and where the statutory framework contemplates the recovery of value for the estate.
What Was the Outcome?
The High Court allowed the funding application. The court’s order effectively sanctioned the proposed arrangement insofar as it involved assigning and selling a proportion of the proceeds of the Trustees’ clawback litigation.
Practically, the decision enabled the Trustees to proceed with the funding structure without the assignment being struck down at the threshold stage on grounds of maintenance, champerty, or abuse of process. The merits of the funding arrangement itself were to be considered separately, but the court removed the principal legal impediment concerning whether the proceeds could be treated as assignable estate property.
Why Does This Case Matter?
Re Fan Kow Hin is significant for insolvency practitioners and litigators because it clarifies the treatment of insolvency clawback proceeds in the context of third-party funding. The decision emphasises that where the Bankruptcy Act expressly provides that sums payable under clawback orders form part of the bankrupt’s estate, the proceeds are capable of being dealt with as estate assets. This reduces uncertainty for trustees seeking funding arrangements to pursue clawback litigation that benefits creditors.
From a doctrinal perspective, the case demonstrates how statutory interpretation can be decisive in overcoming the traditional common law concerns associated with maintenance and champerty. Rather than treating litigation proceeds as inherently non-assignable “fruits” outside the estate, the court anchored its conclusion in the Bankruptcy Act’s text—particularly s 102(4)—and treated the proceeds as property divisible among creditors under s 78(1)(a). This approach provides a structured pathway for future applications involving assignment of proceeds in bankruptcy.
For lawyers advising on litigation funding, the case also illustrates the continuing relevance of the Civil Law Act amendments and the Vanguard framework, but it suggests that the statutory characterisation of the asset may be the threshold issue. Where the asset is within the estate and the arrangement is aimed at enabling insolvency administration and access to justice, the court may be willing to sanction funding arrangements even in the absence of a direct statutory “funding exception” like those expressly provided for international arbitration.
Legislation Referenced
- Bankruptcy Act (Cap 20, 2009 Rev Ed), in particular ss 78(1)(a) and 102(4) (and contextual reference to ss 98 and 99)
- Civil Law Act (Cap 43, 1999 Rev Ed), including the 2017 amendments permitting third-party litigation funding for international arbitration and related proceedings
- Companies Act (Cap 50, 2006 Rev Ed), including s 272(2)(c) (contextual reference via Vanguard)
- Criminal Law Act
- Criminal Law Act 1967
- Enterprise and Employment Act 2015
Cases Cited
- In re Oasis Merchandising Services Ltd [1998] Ch 170
- Neo Corp Pte Ltd (in liquidation) v Neocorp Innovations Pte Ltd [2006] 2 SLR(R) 717
- Re Vanguard Energy Pte Ltd [2015] 4 SLR 597
- Manharlal Trikamdas Mody and another v Sumikin Bussan International (HK) Ltd [2014] 3 SLR 1161
- Buchler and another v Talbot and others [2004] 2 AC 298
- Re Fan Kow Hin [2018] SGHC 257
Source Documents
This article analyses [2018] SGHC 257 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.