IPP Financial Advisers Pte Ltd v Saimee bin Jumaat and another appeal

• Jurisdiction: Singapore
• Judge: Steven Chong JA
• Judgment Date: 13 May 2020
• Neutral Citation: [2020] SGCA 47
• Plaintiff Counsel: Yim Wing Kuen Jimmy SC, Lee Soong Yan Kevin, Ang Si Yi and Manoj Belani (Drew & Napier LLC),Josephine Chong and Navin Kangatharan (Josephine Chong LLC) (Instructed Counsel), Tan Teck Hian Wilson, Lee Ming Hui Kelvin and Ong Xin Ying Samantha (WNLEX LLC)
• Date: 13 May 2020
• Docket Number: Civil Appeal No 154 of 2019 (Summons Nos 138 of 2019 and 150 of 2019) and Civil Appeal No 159 of 2019
• Hearing Date: 06 March 2020
• Subject Matter: Vicarious liability,Limitation,Tort,Civil Procedure,Negligent misrepresentation,Misrepresentation
• Published date: 02 June 2020
• Defendant Counsel: Uthayasurian Sidambaram (Surian & Partners) (Instructed Counsel), Vishnu Aditya Naidu (Phoenix Law Corporation)
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA 47
• Year: 2020

Steven Chong JA (delivering the judgment of the court): Introduction

When does a cause of action for the tort of negligent misrepresentation accrue? It seems reasonably well-settled that it would accrue upon proof of damage in reliance on the negligent misrepresentation. This deceptively simple inquiry is often obfuscated by disputes over when exactly such damage is said to be established.

These appeals concern a claim by an investor against his financial advisers in misrepresenting the risks involved in certain investments, and against their corporate employer in vicarious liability. However, the investment risks did not in fact materialise until some time later. The dispute over the accrual of the cause of action is further compounded by the fact that the parties entered into settlement agreements which were subsequently defaulted on.

Under such circumstances, did the actual damage occur upon investing or upon non-payment on maturity of the investments or upon default under the settlement agreements? Clearly, the determination of this issue will have a pivotal bearing on the time-bar defence. This vexed area of law is the subject of many conflicting authorities. The core area of dispute is typically focused on the proper assessment of true nature of the damage. Does the damage occur upon the mere entry into the risky investments per se or upon the risks materialising or some other event? The courts have attempted to distinguish and reconcile the differing treatments of this issue by categorising the damage inquiry into flawed transaction, no transaction and contingent liability cases. In this respect, it bears emphasis to note that “contingent liability cases” are typically cases where loss and damage would not be suffered until certain events transpire in a particular way and actual detriment occurs thereafter. This judgment will thus examine the differing approaches in order to arrive at a principled basis to determine when damage could be said to have occurred in the specific context of claims for negligent misrepresentation.

In the court below, the first (“Moi”) and second (“Quek”) appellants in Civil Appeal No 159 of 2019 who were the financial advisers pleaded that the claims were time-barred and that time started to run when the respondent (“Saimee”) invested his funds into the risky investments. However, the High Court judge below (“the Judge”) found that time only started to run upon default of the settlement agreements since that was the date “it could be said with certainty that [Saimee] suffered actual loss as a result of [Moi and Quek’s] negligent misrepresentations” and accordingly the claims were not time-barred. Arising from this finding on a point which was neither pleaded nor argued below, we will also examine the question of burden of proof in relation to limitation defences. Once a limitation defence is pleaded, is the burden on the defendant to prove that the claims are time-barred as pleaded or is the burden always on the plaintiff to prove that the claims were brought within the applicable limitation period?

Background

IPP Financial Advisers Pte Ltd (“IPP”), the appellant in Civil Appeal No 154 of 2019, is a financial advisory company approved by the Monetary Authority of Singapore to carry out the following business activities: Advising on the following investment products: life policies, securities, collective investment schemes and structured deposits; Marketing of any collective investment scheme; and Arranging of any contract of insurance in respect of life policies.

Moi was the managing partner of the Vineyard Group at IPP, which was one of the advisory groups at IPP. Moi had a team of financial services consultants working under him, and Quek was one of them. Financial services consultants were to advise clients on insurance, unit trust products and estate planning.

Sometime in 2004, Saimee, then a professional horse jockey, consulted one Candice Lee (“Lee”) from Prudential Insurance Company (“Prudential”) with a view to purchasing insurance cover for himself. In 2005, when Lee left Prudential, she became a financial adviser on behalf of IPP. Saimee thereafter procured insurance policies through IPP. After Lee left IPP’s employ in 2009, Moi and Quek took over Saimee’s portfolio with IPP from Lee.

Around the time of the handover of Saimee’s portfolio, Moi and Quek also advised Saimee to make changes to some of his policies and investments. Saimee’s evidence was that he “trusted their opinions and advice”, and “took their advice on moving funds around when necessary”.

The SMLG Investment

Sometime in January to April 2011, Moi and Quek suggested to Saimee the possibility of investing in the foreign exchange market. Moi and Quek advised him to sell his shares in various companies, and to invest in the foreign exchange market through a trading account with a company known as SMLG Inc (“SMLG”).

This was referred to in the proceedings below as the “SMLG Investment”. More specifically, the trading account was based on an “algorithm trading system” operated by SMLG, and investors using the SMLG trading system would transfer the desired capital into their online trading account. The trading system would thereafter perform automated trades.

Saimee alleged that Moi and Quek made the following representations: Within a year from the date of investment, SMLG would pay Saimee the principal amount invested along with a profit of 40%. The SMLG Investment was safe and capital guaranteed. Moi and Quek had recommended the same to all of their clients.

On 11 April 2011, Moi introduced one Seeni (not called as a witness in the trial below) to Saimee. Saimee was told that Seeni was the Fund Manager for SMLG. This meeting was held outside IPP’s premises, at a hotel café. After the meeting, Saimee, on the advice of Moi and Quek, opened a trading account with FX Primus Ltd (“FX Primus”) for the purposes of the SMLG Investment.

Moi assisted Saimee in registering with SMLG and opening the online trading account with FX Primus. According to Moi, FX Primus was the online trading broker who held the online trading account on behalf of Saimee. The relationship between FX Primus and SMLG was not explored in any detail in the trial below. According to Moi, the setting up of these online accounts was all that was needed to complete the sign-up process, after which the investor could transfer funds to his online trading account for trading to commence.

Thereafter, Saimee transferred a total of US$620,900 into a bank account (held by FX Primus) in Mauritius, in three tranches: US$80,300 on 27 April 2011; US$240,300 on 17 June 2011; and US$300,300 on 3 February 2012.

Unbeknownst to Saimee at this point, Moi and Quek had also invested in SMLG, in the amount of US$49,701.12 and US$21,023.84 respectively. In fact, they had invested in SMLG prior to recommending the SMLG Investment to Saimee.

Sometime in May 2012, after payment for the first tranche of US$80,300 plus profits became due to Saimee, Moi and Quek told Saimee that SMLG was unable to pay, due to a “technical glitch”. According to Moi’s evidence, he first knew about the technical glitch in March or April 2012 and it caused “the whole [of Moi’s] account [to] be wiped out”, and Saimee’s and Quek’s account were similarly affected at around the same time. Moi was, however, unable to explain exactly why this happened. He was also unclear whether the accounts of other clients of SMLG were also affected. Moi and Quek thereafter told Saimee that SMLG required a loan of US$200,000 before SMLG could begin trading again, so that it could make the repayment to Saimee, and that SMLG would repay the loan within two months. At this point, Moi and Quek also disclosed to Saimee for the first time that they too had invested in SMLG. Hence, according to Moi and Quek, the loan to SMLG was essential to recover all their investments.

Thereafter, Saimee gave SMLG the US$200,000 loan. On 17 May 2012, on Moi and Quek’s advice, Saimee signed a “Term Loan Guarantee” with Moi, witnessed by Quek. The Term Loan Guarantee provided that Moi would guarantee the repayment of the US$200,000 loan to Saimee. In addition, the Term Loan Guarantee stated that: The US$200,000 loan to SMLG was for a period of two months, starting from 25 April 2012. Moi would guarantee that Saimee receive an interest of 15% on the loan at the end of the two-month period, ending on 24 June 2012.

On 24 June 2012, ie, two months later, the loan was not repaid. From June to September 2012, Saimee continuously asked Moi and Quek for repayment of his moneys, ie, the US$200,000 loan and the SMLG Investment. On 17 September 2012, on Moi and Quek’s advice, Saimee entered into three separate settlement agreements with SMLG (“Settlement Agreements”). These Settlement Agreements provided that SMLG would pay Saimee US$84,000, US$252,000 and US$375,000 respectively, a total of US$711,000 (“the Settlement Sum”), by 21 September 2012 as the full and final settlement of all claims against SMLG in relation to the SMLG Investment.

As it turned out, Moi and Quek had themselves signed their own settlement agreements with SMLG for their invested sums. Their settlement agreements were all dated 11 September 2012.

On 21 September 2012, however, no sums were repaid to Saimee. Thereafter, from November 2012 to December 2013, each time Saimee (repeatedly) asked about the Settlement Sum, Moi would reassure him that it would be paid shortly.

On 2 December 2013, Saimee and Moi had a Whatsapp conversation in which Moi again reassured him that his investment would be repaid. In addition, Moi informed Saimee for the first time that the SMLG Investment was not offered by IPP. Prior to this message, and at all material times, it was Saimee’s evidence that he was under the impression that the SMLG Investment was “approved” by IPP. Saimee’s response...