Re Vanguard Energy Pte Ltd [2015] SGHC 156

The Singapore High Court in Re Vanguard Energy Pte Ltd considered the validity of litigation funding arrangements in insolvency cases and found that the agreement in this case was allowed as it fell within the scope of section 272(2)(c) of the Companies Act (the “Act”) in relation to the allowable actions of a liquidator. The court underlined that the agreement in this instance fell within section 272(2)(c) because the agreement specified the sale of the proceeds of litigation claims as property of the insolvent company.


Vanguard Energy Pte Ltd (the “Company”) entered into compulsory liquidation in November 2014 and liquidators were appointed. Prior to entering into liquidation, the Company had filed three actions against three separate parties, with the common thread being the allegation that each respondent owed the Company money. The Company had also identified other potential claims.

As the Company had insufficient assets, the liquidators were unwilling to proceed with the pending or potential claims (together, the “Claims”) without any indemnity or funding from a third party. Three shareholders of the Company (together, the “three shareholders” or the “assignees”) agreed to provide such funding and entered into a funding agreement with the liquidators (the “Funding Agreement”). The application before the High Court started as an application for approval of the terms of the Funding Agreement which became at the very start of proceedings an Assignment of Proceeds Agreement (the “Assignment Agreement”) introduced via an affidavit by one of the liquidators.

The key terms of the Assignment Agreement mirrored those in the Funding Agreement with one major difference - under the Assignment Agreement, all rights, title and interests of the Company and the liquidators over part of any monies recovered through the Claims equal to the funds provided (the “Assigned Property”) by the assignees (that is, the three shareholders) would be sold to the assignees by way of assignment. The Assigned Property represented part of the proceeds that are expected to be recovered in the Claims. In contrast, under the Funding Agreement, there was simply a promise by the Company to use part of the proceeds of the Claims to repay the three shareholders the amount funded by them.

Issues before the court

The court found that the Assignment Agreement raised, inter alia, the following issues:

  • whether the assignment of the Assigned Property is a sale of property of the Company permitted under section 272(2)(c) of the Act; and
  • whether the doctrine of champerty and maintenance applied to a sale of property under section 272(2)(c) of the Act.

Section 272(2)(c) empowers liquidators to sell the immovable and movable property and things in action of the company in liquidation. The court stated that it was clear that this section expressly permits the sale of a cause of action and the Company extended this ability to be sold to include the fruits of a cause of action. There are no reported decisions in Singapore on this issue so the court considered English and Australian authorities in coming to its decision.

The position in England is that the sale of either a cause of action or the fruits of an action falls within a liquidator’s statutory power of sale. In Australia, a share of the fruits of an action is regarded as property of the company which can be sold by a company’s liquidators. The court noted that the relevant provisions in England and Australia are similar to section 272(2)(c) of the Act except that the term “property” is defined in the relevant statutes in England and Australia but is not defined in the Act. The court agreed to import the definition of “property” used in the Bankruptcy Act as the term “property” in the Act is used in the same sense.

Given these conclusions, the court found that section 272(2)(c) permits the sale of the fruits of a cause of action that belongs to the company. In the present case, the Assigned Property represented part of the fruits of the Claims which are property of the Company. The assignment of the Assigned Property under the Assignment Agreement therefore fell within the scope of the power of sale in section 272(2)(c), though it would not have applied to the Funding Agreement as the latter did not purport to sell either the Claims or the proceeds of the Claims.

In relation to the application of the doctrines of champerty and maintenance, the court noted that the only question is whether the sale falls within the scope of the statutory power of sale in section 272(2)(c). Maintenance may be defined as the giving of assistance or encouragement to one of the parties to litigation by a person who has neither an interest in the litigation nor any other motive recognised by the law as justifying his interference. Champerty is a particular kind of maintenance, namely, maintenance of an action in consideration of a promise to give a maintainer a share in the proceeds or subject matter of the action.

The court noted that the section may be seen as a statutory exception to these doctrines and therefore the assignment was not subject to them. This decision on the scope of section 272(2)(c) was sufficient for the liquidators and the Company to proceed with the Assignment Agreement but the court went on to consider the doctrines of maintenance and champerty for completeness. The court found that the Assignment Agreement would not be subject to the doctrines even without section 272(2)(c) for various reasons including that the assignees had a legitimate interest in the litigation of the Claims, being shareholders and creditors of the Company.


For the reasons set out above, the court upheld the Assignment Agreement.