Nitine Jantilal v BNP Paribas Wealth Management

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 07 February 2012
• Neutral Citation: [2012] SGHC 28
• Court: High Court (Singapore)
• Docket Number: Suit No 1048 of 2009/D
• Year: 2012
• Published date: 16 February 2012
• Hearing Date: 31 August 2011,04 July 2011,01 September 2011,08 July 2011,12 July 2011,06 July 2011,17 August 2011,07 July 2011,11 July 2011,05 July 2011
• Plaintiff Counsel: Sureshan s/o T Kulasingam (Advocates Legal Chambers LLP)
• Defendant Counsel: K Muralidharan Pillai, Sim Wei Na, Luo Qinghui and Ng Chun Ying (Rajah & Tann LLP)
• Subject Matter: Banking,advice,negligent,customer claiming bank's advice breached regulatory scheme,whether such a breach constitutes a breach of the bank's duty of care,statement of account,verification clauses,bank claiming that customer's claim is barred by verification clause
• Citation: [2012] SGHC 28

Choo Han Teck J:

The plaintiff commenced this action against the defendant when he discovered that his account with the defendant bank had been reduced in value. He sought two remedies: first, an account of all transactions, investments, loans, purchases and sales on his account from its inception to the time the account was closed. Second, he prayed for damages for the losses, alleging that the defendant was in breach of various duties owed to him. The defendant bank is an exempt financial adviser and exempt specialised unit serving high net worth individuals under s 100(2) of the Financial Advisers Act (Cap 110, 2007 Rev Ed) (“FAA”).

The plaintiff established an account with the defendant on 7 November 2002. The opening of the account required the plaintiff to execute various contractual documents: (a) Client Information Form (b) Mandate for Account (c) Schedule to Mandate for Account (d) 2002 Risk Disclosure Statement and Acknowledgment (e) Specimen Signature Card (f) 2002 Terms and Conditions Subsequently, he also signed the 2004 Risk Disclosure Statement and Acknowledgment. I shall refer to the material clauses in these documents as the defendant’s “standard clauses”. The account had various authorised signatories. The plaintiff authorised his father and uncle, Damodar Gokani Jantilal (“Jantilal”) and Gokani Baskar Damodar (“Baskar”) respectively, to operate the Account singly in accordance with the mandate from the creation of the account to its closure. On 11 November 2003, the plaintiff added his cousin, Baskar Damodar Jayes (“Jayes”), as an authorised signatory as well. The plaintiff also placed the bank account under a hold mail arrangement during two periods: from 7 November 2002 to 24 February 2009, and then from 19 June 2009 to 21 July 2009. During these periods, correspondence were retained by the defendant and not despatched to the plaintiff. The hold mail clause governing the arrangement provided that the plaintiff was deemed to have notice of the contents of the correspondence, and if the plaintiff or his authorised signatories did not collect the correspondence within two years, the defendant would be entitled to destroy them.

Stefan Spielbichler (“Spielbichler”) was the defendant’s relationship manager to the plaintiff. He informed the plaintiff, an Indian citizen, about the Financial Investors’ Scheme (“FIS”) established by the Monetary Authority of Singapore (“MAS”). Under the FIS, eligible foreigners are provided with an expedited means of obtaining permanent residency in Singapore. Among the salient requirements, the applicant was required to deposit a sum of at least S$5m with a financial institution regulated by the MAS for a continuous period of five years commencing from the date of issuance of the entry permit (“the FIS terms and conditions”). The plaintiff heeded Spielbichler’s advice and decided to apply for permanent residency under the FIS. Instead of setting up a new account, his existing account was designated as his FIS account (“FIS account”) from 28 March 2006 onwards. Sixteen assets were transferred from the accounts of the plaintiff’s family-owned businesses so that as of 31 March 2006, the FIS Account had US$3,379,313.97 (S$5,469,734.72) of assets. The plaintiff’s application for permanent residency under the FIS was approved by the Immigration & Checkpoints Authority on 3 April 2006.

Subsequently, some transactions were made in relation to the FIS account. Eight transactions were made vis-à-vis four assets in the FIS account (“the specific asset transactions”). Of the signatories, Jayes was the most active in handling the FIS account and liaising with the defendant. He authorised most of these transactions. In addition, 13 swap transactions were made (“the swap transactions”). The plaintiff and his relatives owned a company, Intrading Ltd (“Intrading”), which was incorporated in the British Virgin Islands. Intrading also had an account with the defendant. This account faced a margin call, necessitating a cash injection. Ralph Lau (who took over from Spielbichler as the plaintiff’s relationship manager between June 2006 to 2 May 2008) advised Jayes to swap assets between the FIS account and the Intrading account. Believing this would not offend the FIS terms, Jayes instructed the defendant to execute the swap transactions. Out of the 13 transactions, two were signed by Jayes and Baskar, two by Jayes and the plaintiff, and the rest by Jayes alone. The plaintiff contended that these transactions caused a reduction in the value of the FIS account. He subsequently amended the mandate given to Jayes on 16 May 2008 such that Jayes could not make any withdrawals from the FIS account by himself. In a letter to the defendant dated 4 March 2009, the plaintiff instructed that Jayes be removed as an authorised signatory of the FIS account with immediate effect. Nonetheless, in a letter dated 6 March 2009, the plaintiff authorised the defendant to disclose all information and documents in relation to the account to Jayes. The mandate the plaintiff gave to Jantilal and Baskar remained unchanged. Following the diminution in value of the FIS account, the plaintiff also cancelled the hold mail arrangement with immediate effect from 19 February 2009, instructing all mail to be sent to him by email and post. Urgent matters that required his immediate attention were to be sent by fax and email to a different account. Then, on 10 April 2009, the plaintiff made a further change when he instructed the defendant that he would collect all bank statements, trade confirmations and advices at its premises on a monthly basis. Any other important letters or urgent matters were to be sent by fax and followed by courier to the plaintiff’s office address. The defendant did not carry out these instructions, claiming that they lacked certainty. Therefore, the 19 February 2009 instructions prevailed until 19 June 2009 when new instructions were given that all mail were to be held by the defendant for the plaintiff’s collection on a monthly basis.

Shortly after the plaintiff cancelled the hold mail arrangement on 19 February 2009, he sent a letter dated 26 February 2009 to the defendant, instructing it to transfer monies from the FIS Account to a new account (“the second FIS account”). The second FIS account was set up on 7 April 2009, with only the plaintiff and Baskar as authorised signatories. On 14 April 2009, the plaintiff instructed the defendant to transfer all the monies and assets from the original FIS account to the second FIS account. The plaintiff’s instructions were executed on 7 July 2009, with both accounts coming under the FIS. Eventually, dissatisfied with the defendant, the plaintiff transferred all the monies and assets in the two accounts to another bank. The two accounts with the defendant were closed on 21 July 2009.

In asking for an account from the defendant and damages for the depletion in his FIS account, counsel for the plaintiff made three broad submissions. First, the defendant owed various duties to the plaintiff. These included, inter alia, fiduciary duties, duties as a trustee, a duty of care, skill and judgment, statutory obligations to keep the plaintiff informed and to evaluate the investments and a duty to ensure compliance with the FIS terms and conditions of MAS. Second, these duties had been breached by various acts or omissions on the part of the defendant. The defendant did not explain or inform the plaintiff about the transactions carried out and refused to explain the account’s movements to him. In addition, the specific asset and swap transactions were made without his authorisation and in breach of the FIS terms and conditions. The transactions, the plaintiff further claimed, were made without a prior assessment of their suitability or his interests. Third, the defendant cannot rely on its standard clauses to limit its liability or deny the duties owed and the breach of these duties.

The defendant’s case was first that the plaintiff did not owe any duty to the plaintiff in relation to the FIS account as alleged. Second, the plaintiff was barred from making a claim in relation to the FIS account because of the conclusive evidence clause in the defendant’s standard clauses. Third, even if any such duty arose and the conclusive evidence clause did not apply, no breach had been committed. The defendant had acted on the proper instructions of the plaintiff, his authorised signatories or both. It had also complied with the hold mail arrangement and answered the queries of the plaintiff and his co-signatories.

There are four main issues before me. The first concerns which terms and conditions governed the bank-customer relationship. The second is whether the plaintiff was barred from making his claim. The third is to determine what, if any, duty was owed by the defendant to the plaintiff. If there were, I have to judge whether any of those duties were breached.

The defendant’s counsel argued that several of the standard clauses had three effects. First, the plaintiff was barred from making his claim. Second, no duties were owed to the plaintiff. Third, in the alternative, there was no breach of any duty owed. The plaintiff argued that there were reasons why the standard clauses should not apply to the FIS account. He claimed that the FIS terms and conditions excluded the standard clauses and further submitted that the standard clauses do not form part of the contractual relationship between the plaintiff and the defendant because the plaintiff was not told that an existing account would be designated as the FIS account and he did not understand the standard clauses which were not explained to him. The defendant’s reply was that the FIS terms and conditions did not vary the bank-customer relationship at all. The parties’ submissions raise two questions. First, did the FIS terms and conditions operate to the...