OCBC Securities Pte Ltd v Yeo Siew Huan

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin JC
• Judgment Date: 16 February 1998
• Neutral Citation: [1998] SGHC 44
• Docket Number: Suit No 1130 of 1994
• Date: 16 February 1998
• Year: 1998
• Published date: 19 September 2003
• Plaintiff Counsel: Michael Hwang SC, Andre Yeap and Ng Lip Chee (Allen & Gledhill)
• Citation: [1998] SGHC 44
• Defendant Counsel: Yap Teong Liang and Amarjit Singh (Salem Ibrahim & Partners)
• Court: High Court (Singapore)
• Subject Matter: Stock Exchange of Singapore bye-law VI cll 2 and 3 relate to duty owing by stockbroker to client,Whether plaintiff vicariously liable for negligence of individuals servicing defendant's accounts,Whether stockbroking firm precluded from suing client by misjudging client's creditworthiness,Whether defendant required to prove plaintiff rendering negligent advice,Whether defendant relies on recommendations of individuals servicing her accounts,Stockbroker,Negligence,Duty of stockbroker,Incorporation of additional terms in account opening form,Defendant client trades in shares through plaintiff,Whether defendant can rely on plea of non est factum,Vicarious liability,Tort,Plaintiff a member company of Stock Exchange of Singapore and licensed dealer,Contractual terms,Whether evidence sufficient to establish breach of cl 3,Whether defendant precluded from denying terms incorporated into contract,Breach of duty,Financial and Securities Markets,Securities,Whether defendant has to produce expert evidence to show stockbrokers ought not to give such advice given the circumstances,Contract,Whether stockbroker has breached clause 3 by generating commission as a sole object,Whether stockbroker owes duty to ensure that client does not over-extend herself

Judgment:

LEE SEIU KIN JC

The plaintiff is, and was at all material times, a member of the Stock Exchange of Singapore (SES) and a licensed dealer under the Securities Industry Act (Cap 289). The defendant was at all material times a customer of the plaintiff who traded in shares through the plaintiff.

2.The plaintiff claims that the defendant failed to pay for shares that she had instructed them to purchase on her behalf. This had resulted in the plaintiff incurring losses in the consequential forced sale of those shares. In this suit, the plaintiff sought to recover such losses, with interest, from the defendant. At the end of the trial on 5 December 1997, I gave judgment in favour of the plaintiff as follows: (i). the sum of $136,132.03 with interest at 6% from 12 July 1994;

(ii). the sum of $1,682,155.10 with interest at 6% from 12 July 1994;

(iii). the sum of $581,611.12 with interest of $9,752.23 and further interest at 3.5% above the OCBC prime rate from 17 August 1994;

(iv). the sum of $989,126.67 with interest of $6,813.41 and further interest at 3.5% above the OCBC prime rate from 17 August 1994; and

(v). costs.

The defendant has appealed and I now give my grounds of decision.

3.The defendant is, and was at all material times, a property agent with `Tahiti Home Enterprises`, a business she started in 1981. She was also a director of the following companies at various periods: (1). Pan Field Lines Pte Ltd, from 1976 to 1987;

(2). San Raku (S) Pte Ltd, from 1981 to 1983;

(3). Pitmac (SEA) Pte Ltd;

(4). Seadon Trading Pte Ltd, from 1985 to 1986;

(5). Joseph Ng Management Consultants (S) Pte Ltd, from 1986 to 1988;

(6). Gesterin Trading Pte Ltd, from 1986 to 1991.

4.In addition, the plaintiff produced a copy of the Registry of Companies and Businesses - People`s Profile Information (PPI) which showed that she was also a director of the following companies: (1). Careers by Design Pte Ltd, from January to December 1986;

(2). JBM Investments Pte Ltd, from March to April 1986; and

(3). Motif Auto Pte Ltd, from 1993 to 1994.

The defendant was unable to recall whether she had been a director of these companies. But her counsel, Mr Yap Teong Liang, agreed to the admission of the PPI document, which also showed that she had been the owner or manager of four other businesses which have since been deregistered.

5. The contract between the parties

The first issue that I had to decide was the terms of the contract between the parties. According to the plaintiff`s credit manager, PW2, the defendant traded under four accounts as follows: (i). account no 10006/01, opened on or about 4 July 1989;

(ii). account no 10978/01, opened on or about 26 November 1992;

(iii). account no 39931/39, opened on or about 27 October 1993; and

(iv). account no 44521/39, opened on or about 9 December 1993.

The first two accounts, with the number `01` at the end, were serviced by Ho Seng Hock (PW1), a director of the plaintiff who also acted as a dealer`s representative. The last two accounts, with the number `39` at the end, were serviced by one Yap Eng Piow, a remisier with the plaintiff at the material time.

6.The defendant signed account opening forms in respect of only two of these accounts, viz. No 10006/01 (BA318) and no 39931/39 (BA320-321). The other two accounts were created by the plaintiff to facilitate trading through share margin trading accounts (SMTA) that the defendant opened with Oversea-Chinese Banking Corp Ltd (OCBC Bank). According to the PW2, when a customer opened a SMTA with OCBC Bank, the bank would advise the plaintiff of this whereupon the plaintiff would create a separate account. The customer`s trades financed by the bank would be booked into this new account, which was loosely called a `margin account`. No credit is extended by the plaintiff to the customer under this margin account. When a customer buys shares which he intends to be financed by his SMTA with OCBC Bank, the plaintiff would deliver these shares to the bank for acceptance and payment. Similarly if the shares are sold, payment is made to the bank. If the bank refuses to accept the shares for whatever reason, eg if the credit limit has been reached, the customer would have to pay for them from some other source.

7.The trading account no 10006/01, serviced by PW1, was opened in 1989. In 1992, the defendant applied to OCBC Bank to open a SMTA. Upon receiving notification of the creation of the SMTA for the defendant, the plaintiff then created account no 10978/01 for the purpose of booking the defendant`s trades financed by the SMTA and serviced by PW1. The trading account no 39931/39, serviced by Yap Eng Piow, was opened sometime in October 1993. On or about 9 December 1993 the plaintiff opened account no.44521/39 for the purpose of booking the defendant`s trades financed by the SMTA and serviced by Yap Eng Piow. The documents relating to the creation of these two accounts are found in BA319 (for account no 10978/01) and BA 323 (for account no.44521/39). These are internal documents of the plaintiff which the defendant had never seen before. I find that the creation of these 2 accounts is an internal procedure of the plaintiff and has no effect on the contractual relationship between the parties. This relationship is governed by the documents associated with the opening of the two accounts for which she had signed on the documents, ie: (i). in relation to account no 10978/01, it is governed by the terms of account no 10006/01, opened pursuant to application dated 4 July 1989 (BA318); and

(ii). in relation to account no 44521/39, it is governed by the terms of account no 39931/39, opened pursuant to application dated 26 November 1993 (BA320),

as well as by the practices and customs of the trade and any implied terms.

8.It is common ground that in respect of account no 10006/01, there are no terms and conditions annexed to the application form (BA318), unlike the application form in respect of account no 39931/39 (BA320) where the terms and conditions are printed on the reverse (BA321). In the latter form, BA320, there is the following statement:

I/We the abovenamed person(s) (the `customer`) request that you open account for me/us for the trading of stocks and shares with and through OCBC Securities Private Limited (the `company`) on the terms set out in the reverse side of this application form which terms I/we confirm having read and understood.

There is no similar statement in the first form, BA318. I conclude therefore that the terms printed on the reverse of the form in respect of account no 39931/39 do not apply as express terms of contract to account no 10006/01.

9.However this does not preclude some of those terms, or a modification thereof, from being applicable by implication, having regard to the customs and practices of the trade. The parties agree that the contract between them is governed by the applicable rules and bye-laws of the SES. The duties and conditions imposed on the plaintiff by such bye-laws constitute, in part or in whole, the basis for implying certain terms. I find that the following are, inter alia, the implied terms of the contract between the parties: (i). the plaintiff has a duty to act in the interests of the defendant (see bye-law VI cl 2);

(ii). the plaintiff is to act only on the instructions of the defendant, including oral instructions, unless the defendant had given plaintiff discretionary powers of investment (see bye-law VI cl 2); and

(iii). the defendant is to pay for her purchases, or the net differences of her purchases and sales, within a certain period, failing which the plaintiff is entitled to sell those shares and recover any losses from her (see bye-law II cl 7(a).

10.For account no 39931/39, additional terms of the contract are contained in the terms and conditions printed on the reverse of the account opening form (BA321) and these state, inter alia:

3 Interest at the rate of 3.5% over the OCBC Bank`s prime lending rate per annum shall be paid on all moneys due and payable by the customer to the company.

5 No dealer`s representative (whether dealer or remisier) has authority to waive or adversely affect the company`s rights under these terms or to create any liability on the company`s part under these terms and where the dealer`s representative whose name appears above is a remisier, that such dealer`s representative is appointed by the customer to act on his behalf and is neither the company`s servant nor the company`s employee and all instructions of purchase or sale given by such dealer`s representative if given or purportedly given on the customer`s behalf shall be deemed to be instructions given by the customer on which the company can act in accordance with and look to the customer for responsibility thereof whether or not such dealer`s representative is also jointly, severally or distinctly liable.

11.Therefore any late payment under account no 39931/39 attracts a contractual interest of 3.5% above the OCBC prime rate per annum. The plaintiff contends that this also applies in respect of account no 10006/01. However there is no such term in the account opening form. Mr Yap submits that these terms apply only in respect of account no 39931/39 and not to the other accounts. I accept this submission in relation to account nos 10006/01 and 10978/01 and find that no such term exists in respect of those accounts. On the view that I have taken that transactions under account no 44521/39 are governed by the terms of account no 39931/39, the terms above would govern the transactions in account no 44521/39.

12.In her evidence-in-chief, the defendant said that she did not read the terms and conditions printed on the back of the account opening form for account no 39931/39, ie BA321. She claimed that these terms were not shown and explained to her at all. However she did not offer evidence of any special circumstances in her case that would entitle her to the plea of non...