OCBC Securities Private Limited v Phang Yul Cher Yeow and Another Action

• Jurisdiction: Singapore
• Judge: Chan Seng Onn JC
• Judgment Date: 15 December 1997
• Neutral Citation: [1997] SGHC 339
• Date: 15 December 1997
• Subject Matter: Damages,Whether transactions governed by Kuala Lumpur Stock Exchange's rules of settlement or by rules of Stock Exchange of Singapore,Date of breach,Rule on remoteness in Hadley v Baxendale,When damages may be assessed at later date,Clients' failure to pay for shares on due date,Share trading agreement between stockbroking firm and clients,Assessment,Contract,Securities,Whether instructions from clients to do so breached by stockbroker,Stockbroker failed to force sell shares on next trading day,Purpose of damages considered,Breach,Trading,Financial and Securities Markets,Remedies,Whether remisier breached instruction from clients to force sell on next trading day after date due for payment,Applicable regulations determining relevant date for force selling of shares,Sale and purchase of shares,Whether appropriate time of assessment at point when contract terminated rather than when breached,Compensatory principle,Whether rule on date of assessment absolute
• Docket Number: Suits Nos 2084 and 2085 of 1995
• Published date: 19 September 2003
• Defendant Counsel: Lim Chor Pee (Chor Pee & Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: K Shanmugam and Maria Ho (Allen & Gledhill)

Judgment:

CHAN SENG ONN JC

The plaintiffs, OCBC Securities Private Limited (OSPL) formerly known as OCBC Securities Pte Ltd, are a stockbroking firm. Phang Miow Sin (PMS) and his son, Phang Yul Cher Yeow (PYCY), were both clients of the plaintiffs. When they failed to pay for the contra losses incurred as a result of share trading, the plaintiffs filed Suit No 2085/95 and Suit No 2084/95 against PMS and PYCY respectively.

2.Before the trial commenced, I called parties into chambers for a short Trial Management Conference (TMC) to sort out the various issues of fact and law and determine which issues could be agreed upon. This would help parties focus on the disputed issues at the trial. They would also have more time to do further research on the disputed areas of law. Hopefully, the trial would not be unnecessarily lengthened after the parties had been made aware of the relevant key issues at the commencement of the trial.

3.The defendants PMS and PYCY in their re-amended defences denied liability for the contra losses. However, it was ascertained during the TMC that the defendants were not going to dispute their liability but were proceeding only on the basis that the plaintiffs had not taken sufficient steps to mitigate the loss.

4.As there were common questions of law and fact, I granted the application from counsel for the plaintiffs for both suits to be consolidated. This application was not objected to by counsel for the defendants. The material facts are as follows.

5.PMS opened his trading account with OSPL in May 1988 whereas PYCY opened his later in March 1995. On 18 April 1995, PYCY signed a letter giving full authorization to PMS to enter all sale and purchase transactions on his behalf. The remisier in OSPL who handled the share transactions of PMS and PYCY was one Yap Eng Piow (remisier).

6.The operation of these accounts was subject to the standard terms and conditions of OSPL (the Conditions). Clause 4 of the Conditions stipulates:

The customer agrees to fulfil and perform all orders or contracts made for and on behalf of the customer by the company and undertakes at all times to indemnify and hold harmless the company, its agent and employees against all costs, expenses, loss, liabilities, claims, and demands arising out of anything lawfully done for and in relation to the Account. The customer further agrees that in any event the company shall be kept harmless from any loss as a result of the customer`s breach or failure to carry out its duties and obligations under such orders or contracts.

7.Under cl 3 of the Conditions, the defendants had to pay OSPL interest at the rate of 31/2% above Oversea-Chinese Banking Corporation`s (OCBC) prime lending rate on all moneys due and payable by them. As of 1 July 1994, the interest rate was revised downwards to 21/2% above the prime lending rate.

8.Clause 9 provides that the defendants were to examine all reports of execution of orders, statements of accounts and confirmations despatched to them, which shall be deemed to be conclusive as against the defendants and ratified by them if no objections in writing were received by OSPL within seven days of being forwarded the documents.

9.Statements of account and contract notes detailing the amount of contra losses and the dates and prices at which the shares were forced sold had been forwarded to the defendants. Quarterly statements were also sent to PMS.

10.After PMS had incurred substantial trading losses, OSPL sent him a letter of demand dated 12 May 1995 to make payment of S$954,731.89 together with interest of S$10,004.48.

11.In his reply, PMS asked for copies of the account statements. He did not raise any objections with regard to the contra losses and interest. There was no specific complaint that OSPL ought to have sold the purchased shares immediately on the next trading day following the due date for payment when they received no payment from him. PMS wanted only to know the details of the transactions. He wrote:

Surely and truly before one makes payments one would like to know the exact transactions.

I am sure it is the policy of OCBC Securities to value and treasure the good clientele, particularly so when I have made so many attempts to speak to your Vice-President, Mr Yap Eng Piow pertaining to the settlement of these contra losses. I have never run away from the responsibility to settle these losses, but what I have asked from you is all my rights. Please therefore, let me have the detailed copies of all transactions together with your explanatory notes. Much as I hate to say, if you are in my position, without going through the detailed account would you settle these outstanding balances.

12.OSPL duly furnished the statements of account to him on 23 May 1995 and PMS acknowledged receipt of them in his letter dated 26 May 1995. After seeing the accounts, he again never raised any complaint that there was delay in selling the unpaid shares. He never mentioned that he had given the remisier strict instructions to sell off unpaid shares on the next trading day following the due date for payment, which instructions had not been adhered to. He merely said that he instructed his people to audit the respective accounts thoroughly.

13.It was clear to me that PMS was more concerned with ascertaining the accuracy of the accounts and checking the computation of the contra losses.

14.PMS further responded as follows in his letter to OSPL:

In your interest as well as mine, it is important to establish the actual losses before I can propose a scheme of payment towards full settlement. In the meanwhile, please take note that Mr Yap Eng Piow is only allowed to sell off my 100,000 of CASH when the market price has reached RM5.30. As well as, the 100,000 of Innovest at Malaysian market price of RM1.30.

I have been given to understand that the Malaysian market should firm up in the forth coming week and undoubtedly the above quoted prices should be within reach.

Lastly, I like to reiterate that I am not running away from settling the contra losses.

15.I have set out this portion of the letter in some detail to show the kind of man that PMS was. It does not appear to me that he was someone who would simply allow others to sell his shares at any price at any time. He gave firm and clear instructions on the specific prices at which to sell his shares. This is what most careful investors I imagine would do.

16.When there was no response after having furnished the account statements, OSPL wrote PMS a reminder dated 2 October 1995 some four months later, to settle the outstanding contra losses which then stood at $535,617.57 plus interest, after set-offs from the proceeds of sale of 140,000 cash shares sold on 28 June 1995 and 100,000 Innovest shares sold between 25 July and 30 August 1995. It must be noted that there was still no specific objection that shares ought to have been sold on the next day following the due date, whether as instructed by him or otherwise as per the Kuala Lumpur Stock Exchange (KLSE) settlement system.

17.When no response was received, OSPL instructed M/s Allen & Gledhill to issue him a further demand which was dated 28 October 1995. PMS engaged solicitors, M/s Chor Pee & Co, to reply on his behalf. In that reply dated 1 November 1995, PMS did not dispute any liability for the contra losses and merely stated that he wanted to check the statement of accounts. Although PMS had earlier received copies of the statements of his trading account, additional copies including the relevant contract notes were forwarded to PMS`s solicitors on 3 January 1996.

18.With regards to the contra losses incurred by PYCY, OSPL sent him a letter of demand dated 28 September 1995 asking for payment of S$293,129.93 together with interest of $540.46. When payment was not forthcoming, M/s Allen & Gledhill acting for OSPL, issued a letter of demand on the 28 October 1995. PYCY refused to pay.

19.Apart from the letters from the plaintiffs and their solicitors, the credit manager of the plaintiffs, Mr Woon Kok Yan (PW2), had also personally contacted PMS on the telephone to chase for payment. PW2 said in his oral evidence:

Q: You spoke with D1(PMS) for payment after writing letter chasing for payment? What was conversation about?

A: My impression of conversation was that he never denied the contra loss. I asked him if he owes this amount of money. He did not deny it.

Q: How did you ask him?

A: When I spoke to D1(PMS), I read out the figure from the computer terminal, which is up to date showing the amount that he is owing the company. He said he would make arrangements to pay for it. I do make it a point to do that. To sell at T+8 (ie eight days after transaction date) market was never mentioned at all. This I am very clear.

Q: You had more than one conversation with him?

A: Yes. I can`t remember the other conversations. I can remember very clearly that he did not tell us that you ought to have sold at T + 8 and I read out figures to him, he did not deny them.

20.I have no reason to disbelieve PW2 on this part of his evidence. PMS was in 1995 the executive director of North Borneo Timber Bhd (see AB 123), a listed company. He had extensive share trading experience. In fact, he was extremely active in buying and selling of shares. He would have been familiar with the settlement rules for share trading. Had he given any instructions to his remisier which were not followed, he would most certainly have complained when OSPL demanded payments from him in writing or when the remisier asked him to settle the overdue accounts. PMS had ample opportunity to raise such a complaint. I am inexorably driven to conclude that no such instructions to force sell on the very next trading date after due date could possibly have been given by him to his remisier or to OSPL.

21.In the defence in both suits, the defendants had pleaded that the remisier had breached the instruction from PMS that all purchases...