March 3, 2014

Representative action in Singapore: The decision in Koh Chong Chiah v Treasure Resort

Representative action is legal action in which one or more members of a class of people bring (or defend) a claim on behalf of themselves and other members of that class who share a common interest in that claim. The rights of all persons in that class will be determined solely on the claim brought by the representative claimant. All the claimants in a representative action will succeed, or fail, based on the case mounted by the representative claimant on their behalf, and any judgment or order given is binding on all persons represented.

There are a number of reasons to pursue representative action over a multiplicity of individual suits: judicial economy; costs savings for the parties; consistent outcomes; and the prevention of moral hazard wherein wrongdoers who cause widespread, but individually minimal, harm might not otherwise take into account the full costs of their conduct.

Representative action in Singapore

Representative action in Singapore is prescribed by Order 15 Rule 12 of the Rules of Court which provides that where numerous persons have the same interest in proceedings, such proceedings may be brought by one of them (the representative claimant), unless the Court orders otherwise. This mirrors the representative action procedure in English law under Part 19.6 of the Civil Procedural Rules.

There are two requirements to be satisfied. First, the representative claimant must demonstrate that the persons he is representing have the “same interest” in the proceedings. Second, the Court must be persuaded that it is appropriate for the case to proceed as a representative action given all the circumstances.

This rule is a critical one as representative actions are the only general process in Singapore which enable a large number of persons to be directly involved in a single piece of litigation. It distinguishes representative action from US-style class action, where members of a class need not have the same interest in the claim; there is no such class action regime in Singapore.

Koh Chong Chiah v Treasure Resort

In October 2013 judgment was handed down in the case of Koh Chong Chiah v Treasure Resort in which the Court of Appeal in Singapore considered the application of the representative action rule.

The facts

The claim from which the appeal arose was commenced as a representative action by seven persons on behalf of themselves and 202 other persons, all of whom were members of Sijori Resort Club.

Prior to 2006, members were offered membership on the basis of eight different types of membership application forms. In 2006, Sijori was sold to Treasure Resort. In

December 2006, Treasure wrote to members informing them that members would continue to enjoy their membership privileges. In February 2008, Treasure wrote to inform members that new club membership would be offered in lieu of the existing contracts. Changes proposed to the terms of membership included a 500% increase in the monthly fees. Those who rejected the offer would not be entitled to any membership rights.

In October 2009, the representative claimants commenced proceedings against Treasure alleging, inter alia, breach of contract, fraudulent misrepresentations (the December 2006 letter), and repudiation of contract (the February 2008 letter).

Treasure successfully applied for the proceedings to be discontinued as a representative action. The Judge at first instance was not satisfied that there was requisite common interest amongst the claimants because membership benefits differed under the eight membership agreements and the claimants had not all suffered the same loss. That decision was appealed to the Court of Appeal.

The Court of Appeal’s decision

In its judgment, the Court of Appeal underlined the two-stage test. The threshold requirement of demonstrating the “same interest” would need to be met first, and only then would the Court exercise its discretion as appropriate in the circumstances of the case.

With regard to the first part of the test, having reviewed a large number of authorities in England, Canada and Australia, the Court held that a number of legal principles should be applied:

  • The class of represented persons must be capable of clear definition. This is critical because it identifies the individuals who are entitled to relief and who will be bound by the judgment.
  • The proposed representative(s) must adequately represent the interests of the entire class, and must capably prosecute the interests of the class.
  • There must be significant issues of fact or law common to all the claimants. The Court must compare the significance of the common issues between the claimants with the significance of the issues which differ between them.
  • All the claimants must have the same interest in the relief granted.

Applying those principles, the Court found that there was sufficient commonality of interest for there to be a representative action; the claimants were relying upon the same December 2006 letter to evidence the novation of the membership agreements and the alleged fraudulent misrepresentations, and the same February 2008 letter for their repudiation claim.

The fact of different membership agreements was not considered to be determinative. The Court demonstrated its willingness to be flexible, stating that the claimants could be ordered into sub-classes if necessary. It was also considered significant that, at this stage, the claimants were only seeking declaratory relief and so issues regarding the assessment of damages on a personal basis did not arise.

Nevertheless, the Court found that the breach of contract claim could not proceed as a representative action as the issues were not common, with different breaches being alleged and the circumstances surrounding those breaches being too varied to be appropriately sub-classed.

The Court then considered how it should exercise its Discretion - the second part of the test. It weighed factors in favour of representative action against the prejudice that might arise from the procedural limitations of representative action and found there would be considerable time and costs savings for both the claimants and the defendant and that any suggestions of prejudice to the defendant were more hypothetical than real. Accordingly, the Court found that the advantages far outweighed any

The future of representative action

This is a significant decision in Singapore. The Court of Appeal underlined that O15 R12 is to be applied in a broad and flexible manner so as to preserve the principle of access to justice, describing it as a flexible tool of convenience in the administration of justice.

The Court further noted that representative actions are a practical and economical method of asserting a claim, allowing parties to overcome cost barriers and to take a more powerful adversarial posture than they would through individual litigation.

Although the full impact of this decision remains to be seen, it will arguably facilitate the ability to engage representative procedure going forward, enabling access to justice and empowering the collective David against Goliath in litigation that might not otherwise have been pursued.

If you would like further information on any issue raised in this article, please contact Ian Roberts and Vanessa Kilner.