POA Recovery Pte Ltd v Yau Kwok Seng and others and another appeal

• Judge: Belinda Ang Saw Ean JAD
• Judgment Date: 03 February 2022
• Neutral Citation: [2022] SGHC(A) 2
• Citation: [2022] SGHC(A) 2
• Published date: 08 February 2022
• Docket Number: Civil Appeals Nos 26 and 34 of 2021
• Plaintiff Counsel: Ong Tun Wei Danny, Chow Chao Wu Jansen, Teo Jason, Chan Kit Munn Claudia and Chen Lixin (Rajah & Tann Singapore LLP),Zhuo Jiaxiang and Loo Yinglin Bestlyn (Providence Law Asia LLC)
• Defendant Counsel: Ho Pei Shien Melanie, Lim Xian Yong, Alvin, Gavin Neo Jia Cheng and Khoo Kiah Min, Jolyn (WongPartnership LLP)
• Subject Matter: Contract,Illegality and public policy,Maintenance and champerty,Tort,Misrepresentation,Fraud and deceit
• Hearing Date: 27 August 2021,12 July 2021
• Court: High Court Appellate Division (Singapore)

Belinda Ang Saw Ean JAD (delivering the judgment of the court): Introduction

Some 4,000 investors participated in investments relating to crude oil produced in Alberta, Canada from September 2012 until the ventures ended in October 2015. 1,102 of those investors (“the Investors”) claimed to be victims of an investment fraud that was perpetrated by the respondents and their counterparts in Canada. Their accusation was that the scheme of the investments was nothing more than an illusion, as it turned out to be a Ponzi scheme. The Investors, who claimed to have been defrauded of around CAD130m, collectively sought recourse through the appellant, POA Recovery Pte Ltd (“POA Recovery”), a special purpose corporate entity. The respondents deny making any fraudulent misrepresentation and further deny complicity with any Canadian party in the alleged fraudulent investment.

The trial Judge (“the Judge”) dismissed the action on a standalone ground, namely, the use of a special purpose vehicle to bring a collective action as assignee of the Investors’ claims was impermissible procedurally and in law. The Judge went on to consider POA Recovery’s pleaded case based on fraud and fraudulent misrepresentation, which was the main case pursued during the trial. The Judge concluded, amongst other things, that there was no investment fraud and that the Investors’ losses were the result of a failed investment.

This court will consider whether POA Recovery’s challenges to the Judge’s factual findings satisfy the standard of review to warrant appellate interference, namely, whether the findings of fact were plainly wrong or against the weight of the evidence. Whilst POA Recovery’s allegations of investment fraud have to be tested against all the available evidence adduced at trial, as the Judge noted, the body of available evidence adduced at trial was perceptively disadvantaged by (a) the non-attendance of material witnesses from both sides, and (b) incomplete documentary evidence. The undisputed evidential shortcomings on the legal and factual merits of the dispute will guide this court’s understanding of the arguments, evidence, and materials in the appeals.

In reviewing POA Recovery’s slew of allegations, including the assertions that the Judge did not address in his judgment the various points raised by POA Recovery, the court is guided by the following principles: (a) a judge is only required to deal with what is essential to dispose of the dispute before him; and (b) where fraud is alleged, cogent evidence is required to discharge an appellant’s legal and evidential burden to the requisite standard of proof. With these two points in mind, the focus will be on material aspects of the dispute that are necessary to determine the two appeals. One other feature in the main appeal is the use of a special purpose vehicle to sue. This approach raises issues on the permissibility of collective actions structured in such a manner, and whether the rules on maintenance and champerty were transgressed.

Dramatis personae and background to appeals

There are two appeals before us: AD/CA 26/2021 (“AD 26”) and AD/CA 34/2021 (“AD 34”). Numerous individuals and entities are involved in the present appeals. For clarity, we set out a table listing and abbreviating the key individuals and entities, before elaborating below on their roles and relationships in the alleged fraud:

s/n	Name	Place of origin, incorporation or passport	Remarks
Litigants
1	POA Recovery	Singapore	Appellant, AD 26
2	Yau Kwok Seng (“Yau”)	Singapore	First respondent, AD 26 and AD 34
3	Capital Asia Group Pte Ltd (“CAG”)	Singapore	Second respondent, AD 26 and AD 34
4	Capital Asia Group Oil Management Pte Ltd (“CAGOM”)	Singapore	Third respondent, AD 26 and AD 34
5	Joseph Jeremy Kachu Li (“Li”)	United Kingdom	First appellant, AD 34
6	Thomas C C Luong (“Luong”)	Canada	Second appellant, AD 34
Companies (alphabetical order)
7	Capital Asia Group Oil Management Ltd (“CAGOM Canada”)	Canada	-
8	Capital Asia Group (Hong Kong) Limited (“CAG HK”)	Hong Kong	-
9	Capital Asia Group (M) Sdn Bhd (“CAG MY”)	Malaysia	-
10	Conserve Oil Group Inc (“COGI”)	Canada	-
11	Proven Oil Asia Berhad (“POA MY”)	Malaysia	-
12	Proven Oil Asia Hong Kong Ltd (“POA HK”)	Hong Kong	-
13	Proven Oil Asia Ltd (“POA”)	Canada	-
14	Proven Oil Asia Pte Ltd (“POA SG”)	Singapore	-
Personnel (alphabetical order)
15	Alex Gramatzki (“Gramatzki”)	Canada	-
16	Audrey Tan (“Audrey”)	Singapore	-
17	Candice Lee (“Candice”)	Malaysia	-
18	David Crombie (“Crombie”)	Canada	-
19	Gary Tan	Singapore	-
20	Greg Busby (“Busby”)	Canada	-
21	Jonathan Quek (“Jonathan”)	Malaysia	-
22	Juergen Hainzl (“Hainzl”)	Canada	-
23	Karen Dowling	Canada	-
24	Phyllis Fong (“Phyllis”)	Singapore	-
25	Richard Orman (“Rick Orman”)	Canada	-
26	Robin Chan (“Chan”)	Singapore	-
27	Tan Choon Hua (“Paul Tan”)	Singapore	-

POA Recovery & COGI

The appellant in AD 26, POA Recovery, is a Singapore-incorporated private limited company with an issued share capital of S$1, and it is the entity to which the claims of the Investors were assigned. It is undisputed that the sole purpose of POA Recovery’s incorporation was to pursue the Investors’ claims. The individual Investors’ claims were said to be assigned to POA Recovery by way of formal agreements (“the Assignment Agreements”). Under each agreement, the 1,102 Investors irrevocably assigned to POA Recovery all “rights, title, benefit and interest” in “appropriate legal action against relevant persons and or entities … who have caused or contributed to [their] loss or damage, including the loss of the Crude Oil Investments”.

According to POA Recovery, the crude oil investment (“the Scheme”) involved the Investors purchasing physical barrels of crude oil that would be resold for profit on their behalf by an entity known as POA. POA was a subsidiary of COGI, which operated the oil and gas properties from which the crude oil would be purchased by the Investors. The Investors were promised returns after POA resold the crude oil at a profit.

POA Recovery submitted that the investments under the Scheme were marketed (ie, represented to the Investors) as bearing three key features. Purchase of oil: Each investment was a purchase of crude oil. Profits for Investors: The oil would be resold by POA on behalf of investors at a profit, which would be paid to the Investors quarterly at 3% of the purchase price until the end of the investment term. This 3% profit was derived from the onward sale of the crude oil (which the Investors purchased) by POA to oil giants. The aggregate annual return would be 12%, and at the end of the investment period, the full purchase price would be returned to the Investors. Security: As security for their investment capital, the Investors would receive a first charge over the oil fields in the projects in which they had invested. According to POA Recovery, the investments did not in fact bear any of these features.

The duration of the Scheme lasted from September 2012 to October 2015. We will elaborate on the events that unfolded shortly.

Yau, CAG and CAGOM, Li and Luong

Yau is the first respondent in AD 26. He is the sole shareholder and director of the second and third respondents, CAG and CAGOM. Yau, CAG and CAGOM are also the respondents in AD 34. It is not disputed that CAG and CAGOM acted primarily through Yau. Where appropriate, we refer to them collectively as “the respondents”.

Yau was nominated by POA as the “key employee” involved in the marketing of the investments. CAG was appointed by POA as the exclusive marketing agent of the investments. The agreement between them is referred to by parties as the “Collaboration Agreement”. CAG earned commission of between 18–20% of the capital raised via the investments. The investments were demarcated by projects, named according to the oil fields from which the oil had allegedly been obtained. There was a total of 17 projects between 2012 and 2015 (which we detail in our analysis at [117] below).

CAG conducted the marketing of the investments in Asia with the assistance of agents and sub-agents. CAG appointed two entities, CAG MY and CAG HK, as sales agents in Malaysia and Hong Kong respectively. These entities, in turn, appointed marketing companies within their respective regions, known as Associate Marketing Companies (“AMCs”). CAG also enlisted sub-agents from the AMCs to assist in marketing of the investments. Li and Luong, the appellants in AD 34, were two such sub-agents. These sub-agents were investors who also played a role in marketing so that they too could earn a portion of the commissions that POA paid. Some of these investors, including Li and Luong, were invited to POA and COGI installations in Alberta, Canada to see the rigs and production lines. They returned satisfied with what they had seen.

A prospective investor who wished to invest would be asked to sign a Buyer’s Purchase Order (“BPO”). CAG earned a commission from POA for each BPO procured. The sub-agents who played a role in marketing would also earn a portion of the commissions that POA paid.

CAGOM was incorporated in 2012. It was set up to hold the leasehold security that was provided by POA in respect of the crude oil investments. CAGOM owned 100% of the shares in CAGOM Canada, a Canadian company that was initially used to hold the security provided by POA in respect of the...