Dante Yap Go v Bank Austria Creditanstalt AG

• Jurisdiction: Singapore
• Judge: Paul Tan AR
• Judgment Date: 09 May 2007
• Neutral Citation: [2007] SGHC 69
• Court: High Court (Singapore)
• Published date: 15 May 2007
• Year: 2007
• Plaintiff Counsel: Eddee Ng and See Chern Yang (Tan Kok Quan)
• Defendant Counsel: Tan Xeauwei and Sarala Subramaniam (Allen and Gledhill)
• Citation: [2007] SGHC 69

9 May 2007 Judgment reserved.

Assistant Registrar Mr Paul Tan:

1 Cumbersome at first glance, the rules of civil procedure are an intricate and elegant construction regulating the still adversarial process of civil litigation in the common law world, and certainly, in Singapore. Like steps in a staircase, each rule follows from the previous and simultaneously forms the foundation of the next. Without an appreciation of how each provision in the Rules of Court (Cap 322, R 5, 2006 Rev Ed) (“the Rules”) relates to another as well as to the entire architecture of civil procedure, there will be confusion of principle and inconsistency in application. The present application, being one concerning the discovery of certain documents, serves as a pertinent illustration.

Background to SUM 1923/2007

2 The applicant in SUM 1923/2007, who is also the plaintiff in the substantive action, Suit No. 424 of 2003, opened an account in the Singapore branch of what was then known as Creditanstalt-Bankerverin, the successor-in-title of which is the respondent in this application and the defendant in the main action. This account, referred to as No. 88128 in the Statement of Claim (“the SOC”), was opened vide an Account Opening and Custodian Agreement (“the AOCA”) dated 3 June 1997. In this AOCA contained clauses defining what constituted a valid instruction that the respondent should carry out. The purpose of this account was to facilitate the provision of private and investment banking services to the applicant. Pursuant to this purpose, a second related document dated 3 June 1997 was entered into by the parties. This was the Discretionary Investment Management Agreement (“the DIMA”), which appointed the respondent as the applicant’s investment manager in respect of Account No. 88128. A third document, the Investment Authority Instruction (“the IAI”), also dated 3 June 1997, purported to restrict the discretionary mandate granted by the DIMA to the extent that any purchase or sale of investments must be authorised and that such authorisation was to be given in writing to, inter alia, one Winnifred Ching, whom I gather was a relationship manager.

3 In addition to express terms, of which the ones salient to the present application are highlighted above, the SOC also alleged terms that may be implied to the AOCA and the DIMA, which formed the basis of the parties’ contractual relationship. On this basis, the applicant alleged that the respondent would exercise reasonable care, skill and diligence in advising the applicant on his investment portfolio and in carrying out the transactions made on the applicant’s instructions.

4 The present application concerned an investment on 25 September 1997 in Rossiyskiy Kredit 10.25% Interest Notes (“the Notes”) by the respondent on behalf of the applicant purportedly in violation of any one of the express or implied terms set out above. In so far as the investment breached an express term that any investment required the applicant’s authorisation, it was pleaded at paras 22 and 23 of the SOC that the applicant’s standing instruction at the material time was to purchase on his behalf only US$ denominated securities of “AAA” credit rating or similar. If true, the Notes did not fall within such an instruction. I also understood the pleading in para 25 of the SOC, with its reference in particular to the IAI, as alleging that the investment was made without the proper authorisation because any instruction to invest in the Notes was not made in writing and therefore invalid. To the extent that the investment breached implied terms, the applicant’s case was that the respondent was negligent in investing in the Notes and not thereafter disposing of the same at an appropriate time: see, para 34 of the SOC. In support of this allegation, the following particulars were set out (at para 34(o) to (aa)):

(o) Failing to take into consideration the poor performance of the Russian economy at the material time;

(p) Failing to investigate and/or properly investigate the financial viability and/or solvency of [the Notes];

(q) Failing to monitor and/or properly monitor the sale price of [the Notes];

(r) Failing to consider the risks involved in the purchase of [the Notes];

(s) Investing in [the Notes] issued by Rossiyskiy Kredit which was a non-credit worthy company at the material time;

(t) Investing in [the Notes] when the same carried a poor and/or non-existent investment rating at the material time;

(u) Engaging in imprudent risk-taking on the [applicant’s] behalf;

(v) Failing to sell [the Notes] despite the clear downturn in the Russian economy at the material time;

(w) Continuing to hold [the Notes] despite the clear downturn in the Russian economy at the material time;

(x) Failing to cut investment losses in [the Notes] despite the clear downturn in the Russian economy at the material time;

(y) Failing to advise or negligently advising the [applicant] on the suitability of [the Notes] as investments as prudent private bankers should in accordance with the implied terms averred;

(z) Failing to advise the [applicant] to dispose of the investments in [the Notes] or negligently advising the [applicant] not to dispose of the said investments in the light of the circumstances averred in paragraphs 34(p) to 34(z) herein; and

(aa) Failing to use reasonable skill and care in making the investment in [the Notes].

5 In addition, the applicant pleaded that the advice rendered to the applicant that the Notes were a safe investment and that he should not dispose of them was negligent. In support, the applicant referred to paras 34(p) to (s) of the SOC (set out above) and that the applicant had failed to take into account the impact of the decline in the Russian economy at the material time.

6 The respondent’s answer to whether authorisation was given to purchase the Notes was that the applicant had authorised Ms Cheng, on the telephone, the investment in the Notes: see para 22(k) of the Defence. Having done so, the respondent could not thereafter dispose of the Notes unless authorised by the applicant: see para 29 of the Defence. The respondent also bluntly denied the applicant’s further allegations of breaches of implied contractual obligations in relation to the investment itself and the advice given on the investment, and put the applicant to strict proof thereof: see paras 30 and 31 of the Defence.

The Discovery Application

7 By way of SUM 1923 of 2007, the applicant sought discovery of the following:

(a) Documents evidencing the total number of the Notes owned by the respondent from July 1997 to 25 September 1997;

(b) Documents evidencing the date on which the respondent bought the Notes and the price at which it bought the Notes; and

(c) Documents evidencing the date on which the respondent sold the Notes and the price at which it sold the Notes.

8 The central basis for the application was that the documents requested establish or will lead to other documents establishing that the respondent desired to “get rid of [the Notes] at the material time and did so by onselling the same to [the applicant]”: see para 9 of the affidavit dated 3 May 2007 filed in support of SUM 1923/2006 (“the Supporting Affidavit”). Specifically, it was averred that:

(a) Knowing the number of shares held by the respondent at the time the applicant opened their account will show if and to what extent the respondent would be motivated to sell its own investments in the Notes (see para 10 of the Supporting Affidavit); and

(b) Knowing the date on and price at which the Notes were bought by the respondent and sold would show if and to what extent the latter was trying to palm off a bad investment on its part to the applicant (see para 11 of the Supporting Affidavit).

9 It was, in turn, submitted by the applicant’s counsel, Mr Eddee Ng, that evidence of the respondent’s ulterior motives in investing in the Notes on the applicant’s behalf was relevant to whether:

(a) the Notes were invested in accordance with the necessary authorisation by the applicant; and/or

(b) the respondent had been negligent in its advice in relation the soundness of the investment; and/or

(c) the respondent had been negligent in investing in these Notes on behalf of the applicant.

10 It was also contended by Mr Ng that, in the alternative, the documents sought to be discovered would at least be indirectly relevant in that it would lead to a train of inquiry, permitted under O 24 r 5(3)(c) of the Rules.

11 Objecting to the application, counsel for the respondent, Ms Tan Xeauwei, submitted that the documents sought to be discovered were not relevant to the applicant’s substantive claims, as they were currently pleaded. Moreover, it was argued that even under O 24 r 5(3)(c), a train of inquiry must itself lead to the discovery of directly relevant documents. This, Ms Tan stressed, was not the case.

A preliminary issue

12 I should first address a threshold issue that Ms Tan raised in submission. Her argument was that the application should not be allowed because the applicants were, at bottom, merely discovering documents for the purpose of discrediting the respondent’s witnesses. If Thorpe v Chief Constable of Greater Manchester Police [1989] 1 WLR 665 (“Thorpe”) is correct, Ms Tan argued that it should follow that this application should not be allowed from the outset.

13 In Thorpe, the applicant for discovery wanted documents relating to previous criminal convictions or adjudications of guilt in disciplinary proceedings against the police witnesses who had arrested him. The English Court of Appeal found that the true purpose in seeking the documents in question was to tarnish the witnesses’ credibility. It was in this context that, at 669, Dillon LJ remarked that:

[A] court should not order discovery, or interrogatories which are a form of discovery, on matters which would go solely to cross-examination as to credit. I think that Walton J. was right,...