Herman Iskandar and Another v Bank of America National Trust and Savings Association

• Judge: C R Rajah JC
• Judgment Date: 30 June 1997
• Neutral Citation: [1997] SGHC 176
• Citation: [1997] SGHC 176
• Defendant Counsel: Michael Hwang and Maria Ho (Allen & Gledhill)
• Published date: 19 September 2003
• Plaintiff Counsel: Steven Chong, Andrew Ong Hock Sing and Philip Tay (Drew & Napier)
• Date: 30 June 1997
• Docket Number: Suit No 1996 of 1992
• Court: High Court (Singapore)
• Subject Matter: Whether banker in breach of contractual duties to exercise reasonable care and skill,Banking,Accounts,Deposits,Contractual relationship between banker and customer,Taking prompt and reasonable steps to obtain depositor's instructions,Duty to use reasonable care and skill -Fixed deposit accounts held by bank on non-interest bearing footing after maturity for 12 years

Judgment:

CR RAJAH JC

Cur Adv Vult

The plaintiffs are brothers. The first plaintiff is the executor of the estate of his late father Lugito Surjo Kusno who died on 21/11/78. This estate is referred to as `the Kusno estate` and the deceased as `Mr Kusno`. The first plaintiff is also the co-executor of the estate of his late mother Lily Iskandar who died on 17 September 1983. This estate is hereinafter referred to as `the Lily estate` and the deceased as `Mdm Lily`. Mdm Lily was the second wife of Mr Kusno. The second plaintiff is a co-executor of the Lily estate. The plaintiffs have commenced this action on behalf of the first plaintiff personally, the Kusno estate and the Lily estate. The defendants are a bank with a branch carrying on business in Singapore.

2.The plaintiffs claimed that the defendants breached their contractual duties arising out of their banker and customer relationship with the Kusno estate, the Lily estate and the first plaintiff in respect of the moneys standing in a joint fixed deposit account numbered 71096-96 in the name of Mr Kusno, Mdm Lily and the plaintiff (`the Large account`) and another fixed deposit account in the name of the Kusno estate (`the Small account`). As a result of such breach, moneys in the Large account and in the Small account continued to be held by the defendants on a non-interest bearing footing right through to 28 August 1991 from 24 January 1979 and 30 June 1980 respectively. The plaintiffs claimed damages for such breach in the amount of the compounded interest lost. The defendants denied liability saying they were not in breach of any contractual duties to the plaintiffs in holding the moneys in these two accounts on a non-interest bearing footing. Even if they were in breach, the defendants maintained that the plaintiffs` claim was time-barred by limitation.

3.I have considered the evidence from the witnesses and the documents in this case, and set out below my findings in this matter.

4.Mr Kusno was a wealthy Indonesian businessman with substantial assets in Singapore. He had two families, one from his first marriage (`the first family`) and the other from his second marriage to Mdm Lily (`the second family`). Following his death, there were court proceedings between his two families with regard to his Singapore estate. These proceedings were eventually adjudicated upon in favour of the second family in two stages. On 30 April 1991 the High Court granted probate of the Singapore immovable properties of the Kusno estate to Mdm Lily and the first plaintiff and on 28 January 1991 probate of the movable properties was granted to the first and second plaintiffs.

5.During his lifetime Mr Kusno was a customer of the defendants` Singapore branch. They considered him a valuable customer. Mdm Lily was also a customer of the defendants` Singapore branch with her own Asian Currency Unit (`ACU`) account with the defendants in which she had various deposits. The first plaintiff too was a customer of the defendants on his own account, first with their Hong Kong branch from the early 1970`s and from around 1987 or so, with their Singapore branch.

6.The Large account was opened on 31 May 1973 as a joint account of Mr Kusno, Mdm Lily and the first plaintiff. It could be operated on the signature of any one of the three joint account holders. All the requirements from the joint account holders` side for establishing the account were attended to by Mr Kusno. From time to time he would require Mdm Lily and the first plaintiff to sign forms and other documents in blank without telling them what they were for. The account opening forms relating to the Large account must have been signed in this manner by Mdm Lily and the first plaintiff as neither of them knew they were the joint account holders of the Large account. The first plaintiff only discovered this in 1991. Mdm Lily never did. The correspondence address provided by Mr Kusno for the Large account was at all material times No 111, Cairnhill Circle, Singapore 0922 (`the Cairnhill property`).

7.The first plaintiff who is an Indonesian citizen and at all material times resident in Jakarta, was in his early twenties when the Large account was opened. He had studied to become an architect but left this course of study after two years to work for his father when he was about 21 or 22 years old . On his father`s death he and his brothers from the second family, of whom he was the eldest, took over the management of Mr Kusno`s business interests.

8.When a fixed deposit account such as the Large account was opened with the defendants, each time a deposit was made into it, the defendants would issue the account holder with a fixed deposit receipt which was called a time certificate of deposit (`TCD`) in respect of the deposit. A TCD would set out, inter alia, the customer`s fixed deposit account number, the TCD reference number, the customer`s name, its date of issue, the value date (ie the date from which interest accrued on the deposit), the maturity date, the period of the deposit and the rate of interest payable. Each TCD acknowledged that the amount deposited was received to be placed on fixed deposit for the period specified and at the interest rate specified and promised to pay the amount deposited and interest:

Upon presentation of this receipt, subject to the following rules

1 Interest will cease on due date.

2 This receipt must be duly stamped upon repayment.

3 If this receipt is lost written notice should be given to the bank immediately.

4 Before maturity of this receipt, depositor is not allowed to withdraw his principal or interest.

The TCD would normally be given to the customer.

9.On the opening of the Large account, $5,000,000 was deposited into it on 31 May 1973 for a period of one year. A TCD in respect of this deposit was issued. This deposit was lifted prematurely on 29 January 1974 after some 243 days. Despite the TCD`s fourth rule, the defendants, as they were free to do, agreed to pay interest at 6.2% for 239 days amounting to $207,465.28. The $5,000,000 and accrued interest was then renewed on deposit as a principal sum of $5,207,465.28 for a period of 15 months. Upon expiry of this 15 month period, the principal and interest were rolled over into another deposit for 12 months. This deposit too was broken prematurely on 18 September 1975 after four months and 21 days but interest was paid for three months. The moneys now standing in the Large account amounted to $5,810,329.20. Of this amount, $1,400,000 was placed on fixed deposit for 12 months and the balance was transferred out to other accounts. This deposit too was lifted prematurely after six months and 21 days. The defendants nevertheless paid 182 days of interest. This time all the moneys were transferred out of the Large account.

10.On 24 January 1975 another sum, this time for $1,200,000, was paid into the Large account and placed on fixed deposit for 12 months. Upon maturity, the principal and accrued interest were rolled over into another deposit for 12 months. This was repeated for another 12 months and then another six months expiring on 24 July 1978. When this six-month period expired on 24 July 1978, the defendants did not receive any instructions for renewal until 18 October 1978 when renewal instructions for a term of another six months were received. All principal and accrued interest was nevertheless treated as having been rolled over into a new deposit with effect from 24 July 1978. Accordingly, although the date of issue of this TCD was 18 October 1978, its value date was 24 July 1978 and its maturity date was 24 January 1979. This was the last renewal of this deposit prior to Mr Kusno`s death. The amount of the deposit was $1,490,399.54 and the TCD number was 202831 (`the Large TCD`). The amount of interest accrued thereon upon its maturity on 24 January 1979 was $44,140.33. As at 24 January 1979 there was therefore a principal sum of $1,534,539.87 standing to the credit of the Large account. The Large TCD has been lost.

11.Soon after Mr Kusno`s death, the defendants received two letters dated 4 December 1978 and 6 December 1978 respectively from Phang & Co, solicitors acting for a son from the first family. These letters informed the defendants of Mr Kusno`s demise and put them on notice to hold all moneys standing in the accounts in Mr Kusno`s sole name or held by him jointly with others until proper legal representation was obtained for the Kusno estate.

12.Mr Kusno had left a will appointing Mdm Lily and the first plaintiff as his executrix and executor. They instructed Mr Lui Boon Poh of Messrs Lui Boon Poh & Co, a firm of solicitors, to act for them in obtaining probate of the will in Singapore. Mr Lui wrote to the defendants on 26 December 1978 asking if Mr Kusno had any accounts with the defendants, and in the case of any current accounts, for a statement of such accounts up to the date of Mr Kusno`s demise. The opening paragraph of this letter read as follows:

We act for Madam Lily Iskandar and Mr Herman Iskandar, the executrix and executor of the late Lugito Surjo Kusno, with instructions to apply to the High Court of the Republic of Singapore for the grant of probate.

13.The defendants sent Lui Boon Poh & Co a reply dated 18 January 1979 but Lui Boon Poh & Co did not receive this reply and sent the defendants two reminders dated 6 February 1979 and 9 May 1979 asking for a response. The defendants responded by a letter dated 8 June 1979 stating as follows:

We refer to your letter dated 9 May 1979 (Your Ref: LBP/KC/LY/78249). Kindly note that we have on 18 January 1979 replied to your previous letter dated 26 December 1979 (sic) (Your Ref: LBP/XC/LY/78249).

However, we append hereunder the information which we have previously released as per our letter dated 18 January 1979.

Balances of the current and fixed deposit accounts operated by the deceased in our Bank, from existing available records:

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