The recent decision in DGJ v Ocean Tankers (Pte) Ltd (in liquidation) [2024] SGCA 57 represents a high watermark in the trifecta of insolvency law, the laws of assignment, and the public policy considerations surrounding champerty and maintenance. The case concerned the assignment of claims in an insolvency context.

For context, assignment of bare rights of action could trigger concerns of champerty and maintenance. Further, in the backdrop of insolvency, the courts are more sensitive to ensure that key insolvency tenets such as the principle of pari passu are obeyed. The CA provided valuable guidance on each of these thorny legal issues.

The CA explained that while champerty (the funding of litigation for a share of the proceeds) and maintenance (supporting litigation without a legitimate interest) are generally prohibited, exceptions exist where funding of claims is legitimate. The CA ultimately held that the assignment constituted debt trafficking—an arrangement that could undermine the integrity of insolvency proceedings and was a textbook example of champerty. The CA held that: “What constitutes debt trafficking is ultimately a question of fact and we do not set out to define this exhaustively, but it is without doubt that the present case is a clear example.” This case is particularly relevant for insolvency proceedings where third-party investors are funding claims for a share of the proceeds.

The CA also introduced a new framework for challenging assignments on grounds of public policy. Notably, the CA observed that apart from the public policy underlying maintenance and champerty (i.e. the administration of justice), there could be other aspects of public policy for example the need to treat creditors equally (i.e. the pari passu principle) which applied to invalidate the assignment. This framework approach is particularly useful in the realm of public policy because it accommodates the recognised policy underlying maintenance and champerty while leaving the door open for introduction of other policy concerns that may arise in future cases. It therefore remains to be seen what other aspects of public policy could be raised in a challenge to assignment of causes of action (including third party funding) outside the insolvency context.

The CA’s choice of a framework approach to provide guidance without being prescriptive, especially where public policy is concerned, is laudable and allows room for the law to develop incrementally. In this backdrop, clients would be well-advised to work with counsel who are experienced in appellate work and have the ability to distill existing case law within the broad principles and framework enunciated by the CA.

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