AmFraser Securities Pte Ltd v Goh Chengyu

• Jurisdiction: Singapore
• Judge: George Wei J
• Judgment Date: 27 December 2016
• Neutral Citation: [2016] SGHC 278
• Court: High Court (Singapore)
• Docket Number: Suit No 88 of 2014
• Year: 2016
• Published date: 07 January 2017
• Hearing Date: 19 July 2016,08 July 2016,14 July 2016,13 July 2016,12 July 2016,07 July 2016,11 July 2016
• Plaintiff Counsel: Danny Ong, Jansen Chow and Ong Kar Wei (Rajah & Tann LLP)
• Defendant Counsel: Philip Fong and Nicklaus Tan (Harry Elias Partnership LLP)
• Subject Matter: Financial and Securities Markets,Securities,Trading,Agency,Evidence of agency,Actual authority,Apparent authority,Contract,Contractual terms,Implied terms,Rules of construction,Contra proferentem rule,Tort,Negligence,Duty of care
• Citation: [2016] SGHC 278

George Wei J: Introduction

The plaintiff, AmFraser Securities Pte Ltd (“the Plaintiff”), is a Singapore stock-broking firm. The defendant, Mr Goh Chengyu (“the Defendant”) was the Plaintiff’s former client. On 22 January 2014, the Plaintiff commenced Suit No 88 of 2014 (“the Suit”) against the Defendant to recover outstanding losses from the Defendant’s account which arose from four trades executed on the Defendant’s account in early October 2013 (“the four disputed trades”).

The four disputed trades were placed on 2 and 3 October 2013 in respect of three counters: Blumont Ltd (“Blumont”), Asiasons Capital Ltd (“Asiasons”) and International Healthway Corporation Ltd (“IHC”). On 4 October 2013, there was a substantial, indeed catastrophic, fall in the share values of Blumont and Asiasons, which were both penny stocks. Trading in Blumont and Asiasons was suspended on 4 October 2013. The suspension was lifted on 7 October 2013. The counters were sold by the Defendant between 8 and 10 October 2013, resulting in significant losses in the region of $1.9 million.

It is undisputed that the four disputed trades were placed in the Defendant’s account by his trading representative, Mr Heng Gim Teoh (“Heng”). Heng was a remisier working for the Plaintiff. The crux of the Plaintiff’s case is that Heng had an agreement or understanding with the Defendant, to the effect that the Defendant’s cousin, Mr Adrian Goh (“Adrian”) and later on, Adrian’s friend, Mr Lincoln Lee (“Lincoln”), could provide instructions on trades to Heng on the Defendant’s behalf. In particular, the Plaintiff claims that the four disputed trades were authorised transactions on the Defendant’s account, since they were placed by Heng on the instructions of Lincoln.

By contrast, the Defendant’s position is that the four disputed trades were unauthorised. They were not placed by the Defendant, but were done without his knowledge or approval. The Defendant denies the existence of any agreement or understanding with Heng over the authority of Adrian and/or Lincoln to issue instructions for trades to be executed on the Defendant’s account. The Defendant also counterclaims for, inter alia, an indemnity against the trade losses arising from the four disputed trades.

The Suit was originally fixed for a four-day trial from 10 to 13 March 2015. These dates were vacated on the eve of the trial to enable the Plaintiff to subpoena two material witnesses, Adrian and Lincoln.

The trial eventually took place over seven days between 7 and 19 July 2016. The Plaintiff called six witnesses. The first witness for the Plaintiff was Heng, who was, as I had earlier mentioned, a remisier at the Plaintiff and the Defendant’s trading representative.

The second witness for the Plaintiff was Mr Chen Moh Yong (“Chen”), an assistant manager in the Compliance Department of the Plaintiff. Originally, the Plaintiff had intended to call Mr Lee Wing How (“Lee”), who was the Plaintiff’s Executive Director at the material time. Unfortunately, by the time the matter came on for trial, Lee had resigned from his position and joined another organisation in Malaysia. For this reason, the Plaintiff sought and was granted leave to call Chen to give evidence in place of Lee in respect of a meeting which took place on 10October 2013 at the Plaintiff’s offices. Details of the meeting will be discussed later. The short point that I make now is that this was one of the early meetings during which the Plaintiff was trying to elicit facts as to what had occurred in respect of the four disputed trades. Given these circumstances, leave was granted to call Chen. I shall touch on the absence of Lee later in the judgment.

The third witness for the Plaintiff was Mr Tan Seow Kiat (“Tan”), a credit manager of the Plaintiff.

The fourth witness was Ms Thilaga Valli d/o Ramasamy (“Ms Ramasamy”), a representative from StarHub Ltd. Her evidence related to certain telephone call logs obtained from Heng’s mobile number. Her evidence was admitted into evidence without cross-examination.¹

In addition, as set out at [5] above, the Plaintiff subpoenaed two witnesses, Adrian and Lincoln. On 7 July 2016, the first day of the trial, the Plaintiff applied for leave to put questions to Adrian, which might be put in cross-examination by an adverse party, pursuant to s 156 of the Evidence Act (Cap 97, 1997 Rev Ed). After hearing the parties, I granted the Plaintiff leave to do so.

The Defendant called three witnesses. The first witness was the Defendant. The second witness was Mr Goh Yew Gee (“GYG”), who is the uncle of the Defendant and the father of Adrian. The third witness was Lucas Goh (“Lucas”), who is another cousin of the Defendant. Both GYG and Lucas were involved in the aftermath of the penny stock crash and in particular, in the 10 October 2013 meeting as mentioned at [7] above.

It is to be noted that the affidavits of evidence-in-chief (“AEICs”) of Lucas and GYG were admitted into evidence without cross-examination.² This was done on the basis that the evidence of these two witnesses, as set out in their AEICs, was essentially the same as the evidence of the Defendant and that they would give the same or similar answers in cross-examination on the key points in issue.³ The Plaintiff proceeded on the basis that the Plaintiff’s case had been put to these witnesses (and denied) and that no adverse inference was to be drawn against the Plaintiff.⁴

The Relationship between the Key Witnesses

By way of background, I shall first set out the relationships between the key witnesses of this Suit. As I have earlier stated, Heng worked as a remisier with the Plaintiff. By 2013, he had some nine years or so of experience trading on the stock exchange. There is no dispute that when the Defendant opened up a trading account at the Plaintiff, Heng was appointed as the Defendant’s trading representative.

Whilst there is a dispute over the circumstances in which Heng first met the Defendant in late December 2012 or early 2013, it is reasonably clear that prior to this meeting Heng was not acquainted with the Defendant.

Heng’s position is that he was introduced to the Defendant by Adrian in late December 2012 or early 2013. Adrian at that time was around 24 to 25 years old and a corporate dealer with CIMB-GK Securities Pte Ltd (“CIMB”).⁵ The Defendant, it will be recalled, is Adrian’s cousin and was a project manager at Wee Hur Development Pte Ltd (“WHD”). Without going into unnecessary details, WHD is part of the Wee Hur Group, whose parent company (“Wee Hur”) is listed on the Singapore Stock Exchange. The Wee Hur Group in turn appears to have been founded by GYG (Adrian’s father) and Mr Goh Yeo Hwa (the Defendant’s father).

I pause to note that whilst the Defendant’s full-time job was as a project manager (property development) at WHD, it appears that he had an interest in the stock market. Indeed, by his own evidence, he had three other trading accounts with CIMB, UOB Kay Hian Pte Ltd (“UOB Kay Hian”) and DMG & Partners Securities Pte Ltd (“DMG”).⁶ This will be discussed further below where relevant.

Lincoln was, at the material time, a remisier at Kim Eng Securities Pte Ltd (“Kim Eng Securities”).⁷ Prior to joining Kim Eng Securities, he worked as a remisier with other firms such as GK Goh and Phillips Securities.⁸ Lincoln clearly had considerable experience in the securities business. The evidence was that in 2013 he was handling some 120 to 150 accounts.⁹

Lincoln first met Adrian sometime in 2012. In 2012 and 2013, he was meeting Adrian fairly regularly, around twice a month for social occasions at clubs and discos.¹⁰ It appears that Lincoln was also introduced to Heng at one of these occasions and was told that Heng was a remisier at the Plaintiff.¹¹ It was unclear how often Lincoln had met Heng at other social occasions. That said, on Lincoln’s own evidence, he did meet Heng a few times with Adrian over lunch, where they chatted about trades, the market and counters.¹² The impression that Lincoln gave was that he did not know Heng well and that they did not meet much.

As for Adrian, the evidence was that Lucas, the Defendant and some other senior members of the Goh family held accounts at CIMB all of which were handled by Adrian.¹³ Indeed, I note in passing that according to Adrian, his own father GYG as well as the Defendant enjoyed high trading limits at CIMB.¹⁴ Whilst his evidence was rather guarded, it appears that the Defendant as well as GYG likely traded in penny stock counters such as Blumont, Asiasons and LionGold Corporation Ltd (“LionGold”) through CIMB. Adrian agreed that these counters were “hot” in 2013.¹⁵

The Key Issues

The central issue was whether the four disputed trades placed by Heng in the Defendant’s account were in fact authorised trades. Determination of this central issue required an examination of, inter alia: Whether the Defendant knew or consented to Heng taking instructions from Adrian and/or Lincoln in respect of a large number of trades in the same or similar counters as the four disputed trades and which were placed in his account in the eight-month period prior to the four disputed trades, Whether the Defendant knew or consented to Heng taking instructions from Lincoln in relation to the four disputed trades on 2 and 3 October 2013, and The relevant legal principles under which the Defendant could be held liable for the losses arising therefrom.

Road-map to the Judgment

Given the issues that arise for determination and the brief facts set out above, the judgment will deal with the evidence and issues in the following sequence and by reference to the following main headings: The Opening of the Defendant’s Account with the Plaintiff Relevant Terms and Conditions Governing the Defendant’s Account The Operation of the Defendant’s Account between February 2013 and 1 October 2013 The four disputed trades ...