Crédit Industriel et Commercial v Teo Wai Cheong

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 03 May 2012
• Neutral Citation: [2012] SGHC 94
• Plaintiff Counsel: Manoj Sandrasegara, Smitha Menon, Mohamed Nawaz Kamil, Daniel Chan and Jonathan Tang (Wong Partnership LLP)
• Docket Number: Suit No 626 of 2008
• Date: 03 May 2012
• Hearing Date: 29 November 2011,18 January 2012,17 January 2012,20 January 2012,10 November 2011,13 January 2012,25 November 2011,21 November 2011,04 November 2011,12 January 2012,04 April 2012,16 November 2011,11 January 2012,11 November 2011,19 January 2012,31 October 2011,28 November 2011,16 January 2012,30 November 2011,10 January 2012,09 January 2012,15 November 2011,03 November 2011,17 November 2011
• Subject Matter: Contract,Evidence,Banking
• Year: 2012
• Citation: [2012] SGHC 94
• Defendant Counsel: Chelva Rajah SC (instructed), Sean Lim and Gong Chin Nam (Hin Tat Augustine & Partners)
• Court: High Court (Singapore)
• Published date: 15 April 2014

Chan Seng Onn J: Introduction

This case highlights the problems that arise when phone conversations between a bank’s relationship manager and a client, during which the client may instruct the relationship manager to make investments on his behalf, are not recorded. The main issue is whether an investor instructed his relationship manager to purchase financial products known as accumulators on his behalf, thereby making him liable to make payments associated with these accumulators.

Background Parties

The plaintiff, Crédit Industriel et Commercial (“CIC”), is a French bank registered as a foreign company in Singapore, and it carries on a private banking business in Singapore.¹

The defendant, Mr Teo Wai Cheong (“Teo”), is a former private banking client of CIC. Teo’s relationship manager at CIC was one Ms Ng Su Ming (“Ng”). Ng had also been Teo’s relationship manager at Citibank from 2004 to 2006. When Ng left Citibank for CIC in 2006, she persuaded Teo to open a private banking account with CIC.²

Facts Overarching contracts between CIC and Teo

In the course of opening a private banking account with CIC, Teo signed three standard form contracts with CIC. These formed the overarching contractual documents governing the relationship between CIC and Teo.

Account Opening and Custodian Agreement

On 11 August 2006, Teo opened a private banking account with CIC by signing CIC’s Account Opening and Custodian Agreement (Natural Persons) (“Account Opening and Custodian Agreement”)³, which consists of the following: The Terms and Conditions of the Account Opening and Custodian Agreement; The Risk Disclosure Statement; and The Terms and Conditions for Treasury Services.

The clauses in the Terms and Conditions of the Account Opening and Custodian Agreement which are relevant to this suit are as follows: Clause 6.03:

In respect of the purchase or sale of an Investment the Bank may act as agent of the Client or as a principal to the transaction.

Clause 23.02:

The Client shall indemnify the Bank, its officers and employees against all liabilities, claims, costs and damages of any kind which may be incurred by any of them and all actions or proceedings which may be brought by or against them in connection with any Investment made by the Bank on behalf of the Client or other assets and the exercise of its powers and rights of the Bank under this Charge, unless due to the gross negligence or wilful default of the Bank, its officers or employees.

Clause 24:

The Bank shall have a lien over all the Investments deposited pursuant hereto (or transferred into the Bank’s name or the name of its nominee) for all obligations, costs, payments and expenses incurred or payable by the Client whether directly or indirectly in connection with these Terms and Conditions and the fee payable by the Client to the Bank pursuant to sub-Clause 19.01 hereof. The Bank shall be entitled to realize and sell so much thereof in such a manner as the Bank shall deem fit if any of such costs, payments or expenses, or the fee payable pursuant to sub-Clause 19.01 hereof remain owing after demand and the proceeds thereof (after deducting the expenses of realization and sale) shall be applied in or towards settlement.

The Client shall have no right or claim against the bank in respect of any loss arising out of any realization or sale, howsoever caused and whether or not a better price could have been obtained by either deferring or advancing the date of such realization or sale or otherwise howsoever.

Clause 25.04:

The Bank is authorized to act on the basis of an oral instruction (“Oral Instruction”) given directly or by telephone provided that the Bank is satisfied as to the identity of the caller pursuant to the verification process selected by the Bank.

Any transaction entered into by the Bank pursuant to an Oral Instruction given in accordance with this procedure shall be binding upon the Client whether or not the Client shall have given any subsequent written confirmation in respect of such Instructions. The Bank shall not be liable to the Client for any loss or damage which the Bank may incur or suffer as a consequence of the Bank acting upon such Instructions.

The Client further undertakes to fully indemnify the bank and its officers, employees and agents against all actions proceedings, claims, demands, losses, liabilities and expenses of whatever nature which may be sustained or incurred in consequence of the Bank entering into any transactions pursuant to an Oral Instruction.

...

The portions in the Risk Disclosure Statement which are relevant to this suit are as follows: Introduction:

To all clients intending to undertake financial transactions ... with [the Bank].

The intention of this statement is to draw your attention to the fact that there is some degree of financial risk associated with the financial transactions mentioned above. You should be prepared to carry the burden of these and all other risks and the Bank will not be responsible for any losses arising from your transactions unless the same is caused by the Bank’s wilful misconduct. Accordingly, before deciding whether to transact you must understand the nature, terms and conditions and risks associated with the transactions and consider whether such trading is suitable for you in light of your financial condition and investment objectives.

In particular, you should make such enquiries, take such care and consult such professional advisers, as would be the case had you traded and/or entered into the transactions without the assistance of the Bank. You should make your own appraisal of or investigation of the advantages, disadvantages and risks of a particular transaction and should not rely solely on the Bank to advise you of the same, and the Bank shall not be obliged at any time to provide such advice. If you are in doubt or do not fully understand a transaction, you should refrain from entering into it.

Paragraph 8 titled “Margin Trading”:

You should be aware that you may sustain a total loss of the initial margin and any additional funds that you deposit with the Bank to maintain a position. If the market moves against you, you may be called upon to pay substantial additional margin at short notice to maintain the position. If you fail to do so, your position may be liquidated at a loss and you will be liable for any resulting deficit.

The high degree of leverage due to the small margin requirement that is often obtained in currency, options and futures trading can work against you as well as for you. The use of leverage can lead to large losses as well as large gains. Losses may exceed the amount of margin deposited by you with the Bank and you will be liable to the Bank for any shortfall between the margin deposited and the loss occurred.

...

Paragraph 16 titled “Further Risks”:

...

The Bank highly recommends that you consult your lawyers, accountants, tax advisors, brokers and other professional advisers before making such investment. Accordingly, if you enter into transactions with the Bank, the Bank will assume that you understand and accept the characteristics and risks associated with such transactions.

In accepting any services of facilities made available to you, you agree that (a) you have made your own assessment in relation to investment or trading transactions; (b) the Bank is not under any responsibility to make or give advice or make recommendations; (c) if any suggestions are made by the Bank, it assumes no responsibility for your portfolio or for any investment or transaction made; (d) you are responsible for monitoring the performance and continuing appropriateness of outstanding transactions; ... (f) any risk associated with and any loss suffered as a result of the Bank entering into any transactions or investments on your behalf is your responsibility; and (g) you will indemnify the Bank against any loss or liability which it may suffer in relation to the foregoing matters.

Acknowledgment of receipt of the Risk Disclosure Statement, which was separately signed by Teo:

This acknowledges that I/we have received a copy of the RISK DISCLOSURE STATMENT and that I/we have carefully read and understood its contents.

I/We also acknowledge that the Risk Disclosure Statement is not and cannot be comprehensive, and further confirm that I/we have made such enquiries on my/our own and have taken or will take such care as would be in the case had I/we traded and/or entered into the transactions without the assistance of the Bank. The Bank shall not be liable for any loss, damage or liabilities which may be incurred by us in connection with the transactions.

The clauses in the Terms and Conditions for Treasury Services which are relevant to this suit are as follows: Clause 6.1:

In addition to the Bank’s rights of set-off, combination and consolidation in respect of the Client’s Account(s) or any other right which it may at any time be entitled whether by operation of law, contract or otherwise, the Bank may apply (without prior notice to the Client) any credit balance (whether or not then due) on any account to which the Client is beneficially entitled (whether singly or jointly) or any Collateral towards the satisfaction of any or all of the Client’s liabilities (whether present or future, actual or contingent or several or joint) under these Terms and Conditions or under any Treasury Contracts.

Clause 6.2(a):

For the purpose of closing-out and liquidating the Treasury Contract under Clause 9, the Bank may, without liability to the Client, realise or sell so much of the Collateral or take all such action as the Bank deems fit (including but not limited to liquidation of the Collateral prior to its maturity or conversion of the same into other currencies), and in this regard the Client hereby irrevocably authorises the Bank to act on the...