Deutsche Bank AG v Chang Tse Wen

• Jurisdiction: Singapore
• Judge: Philip Pillai J
• Judgment Date: 11 December 2012
• Neutral Citation: [2012] SGHC 248
• Court: High Court (Singapore)
• Docket Number: Suit No 731 of 2009/F
• Year: 2012
• Published date: 14 December 2012
• Hearing Date: 01 November 2010,29 October 2010,15 April 2011,28 October 2010,12 November 2010,11 November 2010,04 November 2010,15 November 2010,22 November 2010,03 November 2010,10 February 2011,23 November 2010,08 November 2010,27 October 2010,10 November 2010,16 November 2010,02 November 2010,25 August 2011,30 May 2011,21 December 2010,12 April 2011,26 October 2010,18 November 2010,09 November 2010,18 February 2011,19 November 2010,04 October 2011
• Plaintiff Counsel: Ang Cheng Hock SC, Tan Xeauwei, Ramesh Kumar and Joel Lim (Allen & Gledhill LLP)
• Defendant Counsel: K Muralidharan Pillai, Sim Wei Na, Luo Qinghui and Ng Chun Ying (Rajah & Tann LLP)
• Subject Matter: Tort,misrepresentation,fraud and deceit,Equity,fiduciary relationships,duties,when arising,negligence,breach of duty,duty of care,estoppel,contractual estoppel,evidential estoppel
• Citation: [2012] SGHC 248

Philip Pillai J: Introduction

This action raises two questions of law relating to private banking: (i) under what circumstances may private banks acquire pre-contractual legal duties to prospective clients and (ii) how do subsequently signed banking documents affect such earlier acquired legal duties. This case turns on its particular unusual facts which will be set out at length in this judgment. In the light of this, I will summarise the facts pertaining to the parties, main events and claims to bring the two questions of law into sharper focus.

The plaintiff, Deutsche Bank AG (“DB”), filed the original claim against the defendant, Dr Chang Tse Wen (“Dr Chang”), for repayment of US$ 1,788,855.41 (with interest) outstanding from his private wealth management account with DB’s Singapore branch. The defendant counterclaims for damages arising from actionable misrepresentation, fraudulent misrepresentation, breach of a duty of care and breach of fiduciary duty against DB and DB’s relationship manager, Mr Wan Fan Ting, (whom I shall refer to hereafter as “Mr Wan” with respect to events prior to 15 March 2007 and thereafter as “the RM”) as the first and second defendant respectively. DB and the RM deny Dr Chang’s counterclaims. They further rely on the banking documents (specifically, the non-reliance, own-judgment, non-advisory clauses in these documents) to operate as evidential or contractual estoppels that prevent Dr Chang from establishing the necessary legal elements of his claims.

Dr Chang’s claims are founded on his averment that the RM and DB undertook to advise him to manage his new wealth. They failed to do this. They later sold him 32 derivative products within three weeks and two more thereafter, all of which led him to lose about US$49 million.

In December 2006, Dr Chang, accompanied by Professor Carmay Lim Siow Chiow (“Prof Lim”), first met Mr Wan, when Mr Wan was then the Priority Banking Manager of Standard Chartered Bank, Hong Kong (“StanChart HK”). Both Dr Chang and Prof Lim were research scientists. Mr Wan came to learn then that Dr Chang was to come into considerable new wealth from the sale of his shares in Tanox Inc., a NASDAQ-traded drug development company a corporation of which he was co-founder. At this meeting, Prof Lim gave Mr Wan her contact and email details.

In January 2007, Mr Wan left StanChart HK to join DB’s Hong Kong Private Wealth Management Services (“PWMS”) unit as a relationship manager. In February 2007, in his capacity as DB’s RM, Mr Wan contacted Prof Lim, asking to meet up with her and Dr Chang. On 15 March 2007, the RM met Prof Lim and Dr Chang in Taipei (“the 15 March 2007 meeting”) to persuade each of them to open private banking accounts with DB. The RM had, prior to this meeting, learnt about an announced tender offer to purchase Tanox Inc. shares at US$20 per share.

At this second meeting, the RM made a presentation to Prof Lim and Dr Chang on the range of services that DB could provide each of them and separately recorded their respective investment experience and needs. Prof Lim signed an account application form immediately whereas Dr Chang, when invited to sign an account application form too, told the RM that he would appoint DB to advise him on managing his new wealth and would sign the form when he received his share sale proceeds.

Just before receiving his share sale proceeds, Dr Chang informed the RM that he was ready to sign the account application form, which he did which was 1 August 2007. He followed up by depositing a portion of his cash receipts with DB. Prior to this, Dr Chang had sought and received advice from the RM on how to effect the transfer of his Tanox Inc. founder shares.

On 19 November 2007, Dr Chang purchased a Citigroup Discount Share Purchase Program (“DSPP”) from DB and signed the DSPP documents. DB unilaterally extended and applied margin financing to Dr Chang for this and all his DSPP purchases thereafter. Between 19 November and 12 December 2007, within a span of 23 days, Dr Chang purchased 32 DSPPs on the RM’s advice and 2 more DSPPs in February 2008.

By 18 December 2007, he started receiving margin calls from DB. On 7 March 2008, Dr Chang learnt from DB for the first time that he had an exposure of US$76 million. In November 2008, Dr Chang unwound his open DSPPs and DB exercised its contractual termination and security rights against Dr Chang’s accumulated shares. Dr Chang claims to have suffered a total loss of about US$49 million from the 34 DSPP transactions.

It is Dr Chang’s case that the RM and DB misrepresented the nature of the services they would provide him; that they assumed a duty of care to use reasonable care to advise him on managing his new wealth which they, in these circumstances, failed to do; and finally that they assumed a fiduciary obligation to him which they, in these circumstances, breached.

Facts

As the unusual facts of this action are critical in determining the outcome of this action, I shall first set out the material events in evidence as they unfolded chronologically in relation to the banking documents’ terms and conditions signed by Dr Chang under the following broad headings: the events that occurred before the Service Agreement dated 1 August 2007 (“Part I—The Pre-Service Agreement Events”); the Service Agreement dated 1 August 2007 (“Part II—The Service Agreement”); the Derivative Agreement dated 23 November 2007 and the DSPP purchases (“Part III—The Derivative Agreement”); and the termination events (“Part IV—The Termination Events”).

Part I: The Pre-Service Agreement Events

This part of the narrative describes how Dr Chang first came to meet Mr Wan in Hong Kong on 28 December 2006 and leading up to the 15 March 2007 meeting in Taipei.

The meeting in Hong Kong on 28 December 2006

Prof Lim, accompanied by Dr Chang, visited StanChart HK on 28 December 2006 to enquire whether her account had been credited with the sale proceeds of her father’s gift of shares to her. They met Mr Wan, who was StanChart’s priority banking manager then, for the first time. Wishing to open a personal new account, Dr Chang signed a StanChart HK account opening form which Mr Wan gave him. Mr Wan informed him that the bank required independent documentary confirmation of his address. Dr Chang returned subsequently and gave Mr Wan a faxed copy of his Fidelity account statement which contained his address. This statement contained other information which revealed that Dr Chang owned Tanox Inc., last valued at an estimated US$50 million. According to Dr Chang, Mr Wan looked visibly surprised when he noticed this information. Prof Lim thereupon informed Mr Wan that Dr Chang was co-founder of Tanox Inc., which was soon to be acquired by Genentech Inc., a major US bio-engineering corporation.

At the trial, Mr Wan claimed that he became aware that Dr Chang was the co-founder and substantial shareholder of Tanox Inc. only at the 15 March 2007 meeting. He then admitted that when they first met in Hong Kong, Prof Lim informed him that Dr Chang “was going to receive some money soon and wished to invest such money upon receipt”. I find Mr Wan to be an evasive and unreliable witness. In court, he admitted initially that he had seen Dr Chang’s Fidelity account statement at StanChart HK, but that the statement had been unclear. He then changed his position, claiming that he could not recall if he had even received the Fidelity account statement. He later clarified that he was under the impression from the first meeting that Dr Chang was worth at least US$5 million. He finally admitted under cross-examination that he knew Dr Chang’s net worth was at least about US$26 million from his StanChart HK days. This was just one of several instances in which Mr Wan prevaricated in court and was obliged to resile from his initial evidence as the following narrative will reveal.

In the course of their first meeting in Hong Kong, Prof Lim wrote and gave Mr Wan her contact details. She explained in court that this was for him to notify her when her own share sale proceeds were received in her StanChart HK account and also to facilitate the opening of Dr Chang’s new StanChart HK account. I accepted her explanation and disbelieved Mr Wan’s explanation that he had then informed them that he was leaving StanChart HK to join another bank and that Prof Lim had given him her contact details for him to contact her after he “settled down”. Given this was their first meeting and that she obtained no confirmation of the receipt of expected funds into her account, there is nothing to suggest that Prof Lim would have volunteered her personal contact details and invite him to contact her after he settled down in his new position at another bank. Furthermore, his explanation is not substantiated by the “cold-call” tone and content of his two subsequent emails to Prof Lim. His email to Prof Lim, dated 5 February 2007 and titled “Hello from Johnny Wan”, read:

I would like to express my sincere apology to you and Mr. Chang because I left Standard Chartered Bank and have joined Deutsche Bank (Hong Kong) on Feb 2007. …

... I have 12 years experience in financial service industry and had been worked [sic] for Morgan Stanley, Charles Schwab and HSBC for years. I believe my experience and expertise can definitely add value to you. I will be in Taiwan at the month end and I truly appreciate the opportunity to meet with you and Mr. Chang. I am look [sic] forward to seeing you and Mr. Chang.

[emphasis added]

His second email dated 5 March 2007 titled “Trip to Taipei” sent by him to Prof Lim, which Prof Lim forwarded to Dr Chang, read:

My name is Johnny Wan and used to help you at Standard Chartered Bank. I will be in Taipei for business trip on March 14-15, 2007. I would like to stop by at your convenience. Please let me know. Thank you and look forward to meeting with you.

It was...