Go Dante Yap v Bank Austria Creditanstalt AG

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 08 August 2011
• Neutral Citation: [2011] SGCA 39
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 156 of 2010
• Published date: 11 August 2011
• Year: 2011
• Hearing Date: 08 February 2011
• Plaintiff Counsel: Kannan Ramesh, Eddee Ng and Paul Seah (Tan Kok Quan Partnership)
• Defendant Counsel: Christopher Anand Daniel and Harjean Kaur (Advocatus Law LLP)
• Subject Matter: Banking,Tort
• Citation: [2011] SGCA 39

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

This appeal arose from the judgment of the trial judge (“the Judge”) in Go Dante Yap v Bank Austria Creditanstalt AG [2010] 4 SLR 916 (“the Judgment”), which concerned a dispute between the Appellant and the Respondent regarding losses suffered on the Appellant’s investment portfolio following the Asian financial crisis of 1997 (“the Asian Financial Crisis”).

Before the Judge, the Appellant advanced the following two claims: (a) that 16 investments, entered into by the Respondent in his name, with his own funds as well as with funds loaned to him by the Respondent, were not authorised by him (the “Authorisation Claim”); and (b) that the Respondent owed him, and breached, contractual and tortious duties which obliged it to advise him whether to make, hold or dispose of the investments that were to be made by the Respondent on his behalf, which breach caused him to suffer losses in relation to three of the 16 investments (the “Advisory Claim”).

The Judge dismissed both the Appellant’s claims. On the Authorisation Claim, he found against the Appellant on the facts, preferring the Respondent’s evidence, notwithstanding that it was of a less than ideal quality. On the Advisory Claim, the Judge followed authorities in England and Singapore and held that, on the facts, there was no contractual or tortious duty on the Respondent to give investment advice to the Appellant.

The Appellant appealed against both these holdings. On the Authorisation Claim, the Appellant argued that the Judge should have preferred his evidence over the Respondent’s, and/or that the Judge should have drawn an adverse inference against the Respondent in view of the poor quality of the latter’s evidence. On the Advisory Claim, the Appellant argued that, although the Judge correctly appreciated the legal principles involved, he had misapplied them to the facts of the case.

At the oral hearing before us, counsel for the Appellant conceded that the appeal on the Authorisation Claim faced considerable difficulties, and he stated that, although he was prepared to argue the point, he preferred to focus his submissions on the Advisory Claim. Counsel was quite right to do so for, as we indicated at the hearing, the Authorisation Claim was hopeless in light of the Judge’s clear finding of fact that the Appellant had not proven that the 16 investments were unauthorised. As we did not think that the Judge’s finding in this regard could be said to have been against the weight of the evidence, there was little point in pursuing the appeal on that basis, and the main focus of the appeal was accordingly on the Advisory Claim.

At the conclusion of the hearing, we dismissed the appeal and awarded 90% of the costs of the appeal to the Respondent. Given our dismissal of the appeal in relation to the Authorisation Claim (for the same reasons expressed by the Judge), what follows is an explanation of our decision on the Advisory Claim, as we did not entirely agree with the Judge’s reasoning in this regard.

Facts Background

The Appellant was a businessman and national of the Philippines, while the Respondent was an Austrian-incorporated bank which, at the material times, operated branches in Hong Kong and Singapore. In early 1997, the Appellant was recommended the services of one Winnifred Natasha Tong Ching Laude (“Ms Ching”), a vice-president of the Respondent’s Hong Kong branch, and met with her for the purpose of opening an account with the Respondent.

Account opening

On 3 June 1997, the Appellant opened two accounts with the Respondent: a savings account with the Hong Kong branch (the “Hong Kong account”) and an investment account with the Singapore branch (the “Singapore account”), with Ms Ching handling both accounts. Both accounts required the Appellant to execute the following contractual agreements (collectively, the “Account-opening Documents”): (a) the Account Opening and Custodian Agreement (“AOCA”) for the Singapore account; (b) the AOCA for the Hong Kong account; (c) the Discretionary Investment Management Agreement (“DIMA”) for the Singapore account; (d) the DIMA for the Hong Kong account; (e) the Investment Authority Instructions (“IAI”) for the Singapore account; and (f) the IAI for the Hong Kong account. Both sets of AOCAs were in identical terms, as were both sets of DIMAs and IAIs, and therefore each pair of identical documents will be referred to as the “AOCA”, “DIMA” and “IAI”, respectively. The DIMA conferred on the Respondent the power and discretion to trade in securities on behalf of the Appellant using his account, without the need for his specific authorisation. However, the Appellant desired to limit the discretion that the DIMA conferred on the Respondent, and, to that end, executed the IAI, under which it was agreed that, notwithstanding the terms of the DIMA, the Respondent was not authorised to make any investment or sell any securities for the Singapore or Hong Kong account without the Appellant’s instructions. In other words, the Appellant was to have the final say in deciding what securities to purchase or sell.

In addition, the Appellant also executed a loan facility letter (“the Loan Facility”) under which the Respondent, inter alia, agreed to furnish the Appellant with a loan of up to US$5 million.

The investments

From June to November 1997, the Appellant remitted approximately US$5 million into the Singapore account. From July to October 1997, 16 investments, which comprised mainly emerging market debt instruments, were entered into by Ms Ching under the Appellant’s Singapore account, partly or wholly financed by loans from the Respondent to the Appellant’s Hong Kong account, pursuant to the Loan Facility.

The monthly meetings

From August to November 1997 (ie, throughout the period Ms Ching was entering into the 16 investments), the Appellant and Ms Ching had monthly meetings, where Ms Ching would show the Appellant the portfolio, currency and money market analyses from the previous month’s transactions. According to Ms Ching, the Appellant would go through and discuss these documents with her, in order to review the performance of the Appellant’s investments, which included examining the projected returns from these investments.

These proceedings

From September 1997 onwards, most of the securities comprising the 16 investments were either sold before maturity or redeemed upon maturity, while two securities were transferred by the Appellant to a different bank account with the Respondent. Consequently, only three of the 16 investments remained in the Singapore account by August 1998, on which the Appellant had suffered significant losses as a result of the effects of the Asian Financial Crisis, and it was these securities which formed the subject matter of the Advisory Claim: (a) Bakrie International Finance FRN; (b) Bakrie Brothers 1-year PN; and (c) Rossiyskiy Kredit 10.25% Interest Notes. The first two securities will be referred to collectively as the “Bakrie bonds”, while the third will be referred to as the “Rossiyskiy notes”.

From June to November 1999, there was an exchange of correspondence between the parties, in which the Appellant expressed unhappiness over the state of his investments (including complaints that certain investments were unauthorised), eventually culminating in the Appellant threatening legal action against the Respondent over its alleged “mishandling” of his investment accounts. The Appellant subsequently made good on his threat and commenced the present proceedings.

The Judgment

In the Judgment, the Judge made the following significant findings of fact: (a) the Appellant had not proven that the 16 investments were unauthorised (see [68]–[75] of the Judgment); (b) the 16 investments must therefore have been authorised (see [76] of the Judgment); (c) the Appellant could easily understand the nature of the 16 investments and understood the types of risks involved, had sufficient knowledge of investment principles, and was therefore not an inexperienced and unsophisticated client who had to rely entirely on the Respondent for investment advice (see [91]–[94] of the Judgment); and (d) Ms Ching provided recommendations of investments to the Appellant the monthly meetings (see [100] and [109] of the Judgment).

In dealing with the Advisory Claim, the Judge also considered a number of recent English and Singapore authorities, viz: (a) IFE Fund SA v Goldman Sachs International [2007] 2 Lloyd’s Rep 449 (“Goldman Sachs”); (b) JP Morgan Chase Bank (formerly known as The Chase Manhattan Bank) (a body corporate) and others v Springwell Navigation Corporation (a body corporate) [2008] EWHC 1186 (“Springwell”); (c) Titan Steel Wheels Limited v The Royal Bank of Scotland plc [2010] EWHC 211 (subsequently reported as Titan Steel Wheels Limited v The Royal Bank of Scotland plc [2010] 2 Lloyd’s Rep 92) (“Titan Steel”); and (d) Crédit Industriel et Commercial v Teo Wai Cheong [2010] 3 SLR 1149 (it should, however, be noted that this court has, in the light of newly disclosed documents, ordered a new trial in that case (see Teo Wai Cheong v Crédit Industriel et Commercial [2011] SGCA 13)). After elaborating the principles to be distilled from these cases (with which, on appeal, the Appellant did not quarrel), the Judge applied them to the facts and held that the Respondent did not owe any contractual or tortious duty to advise the Appellant as to his investments (see [107] and [111] of the Judgment). It was therefore with the application of those principles to the facts of this case that the Appellant took issue.

Our decision

As mentioned at [5] above, the only issue before us was whether the Judge was correct in his reasoning and conclusion on the Advisory Claim.

Preliminary observations on...