RBS Coutts Bank Ltd v Shishir Tarachand Kothari

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 03 December 2009
• Neutral Citation: [2009] SGHC 273
• Court: High Court (Singapore)
• Published date: 10 December 2009
• Citation: [2009] SGHC 273
• Plaintiff Counsel: Hri Kumar Nair SC and Benedict Teo Chun Wei (Drew & Napier LLC)
• Defendant Counsel: Samuel Chacko and Angeline Soh Ean Leng (Legis Point LLC)
• Subject Matter: Banking,Civil Procedure
• Year: 2009

3 December 2009

Judith Prakash J:

Introduction

1 This matter came before me on appeal by Shishir Tarachand Kothari (“the Defendant”) against the decision of the Assistant Registrar who ordered inter alia that final judgment be entered against the Defendant for the sum of USD 569,109 with interest (“RA 83”) and that the Defendant’s application to amend his defence be dismissed (“RA 84”). At the hearing of the appeal, the Defendant filed an application in Summons No. 1578 of 2009/D (“Defendant’s Application”) for leave to adduce further evidence. After hearing submissions from both sides, I dismissed both appeals with costs to RBS Coutts Bank Ltd (“the Plaintiff”) in respect of the same and of the application to adduce further evidence. The Defendant is not satisfied with my decision and has since appealed against it. I now provide my detailed grounds of decision.

Background Facts

2 The Plaintiff carries on private banking business. The Defendant was at all material times a customer of the Plaintiff. On or about 10 August 2006, the Defendant opened an account (Account No. 380xxxxxxx) (“the Account”) with the Plaintiff for the purposes, inter alia, of engaging in investment and forex trading activities. The Defendant was duly furnished with a set of the account opening forms (“the Application Form”) together with the Plaintiff’s General Terms and Conditions (“the General Terms”).

3 The Account was governed by the General Terms as well as the following documents:

(a) Master Agreement for Over-The-Counter Derivatives Trading (“Trading Master Agreement”);

(b) Counter Indemnity;

(c) Charge Agreement; and

(d) Facility Agreement for Revolving Loan of USD 4 million and Bank Guarantee issued in favour of the Royal Bank of Scotland to support derivative transactions of USD 1 million (“the Facility Agreement”)

(collectively the “Agreements”)

It will be seen that a selection of clauses in the General Terms and Agreements constitute the kernel of the present dispute and the Plaintiff’s case.

4 After the opening of the Account, the Defendant engaged in, inter alia, various forex transactions (“the Forex Transactions”) during the period 1 February to 9 November 2007. All was well until around end 2007 when the US dollar began to weaken and market forces drastically turned against the Defendant’s positions in the Forex Transactions. From around January 2008, the Plaintiff’s officers informed the Defendant that he had to either inject more funds into the Account in order to maintain his positions, or to close out the positions so as to cut losses. The Defendant failed to do either.

5 On 18 March 2008, in accordance with the Plaintiff’s rights under Clauses 29.2 and 46.5 of the General Terms, the Plaintiff closed out the Defendant’s positions in the Forex Transactions. Clauses 29.2 and 46.5 of the General Terms provide as follows:

29.2 You acknowledge and agree that RBS Coutts may dispose, or initiate a disposal by an Associated Person of RBS Coutts, of any of the Securities in settlement of any liability owed by you or on your behalf to:

29.2.1 RBS Coutts;

29.2.2 RBS Coutts’ Associated Person; or

29.2.3 A Third Person.

46.5 You hereby irrevocably authorize RBS Coutts, at its discretion, to act on your behalf at any time and without any notice or liability to you, to apply, liquidate, set-off, sell, realize, dispose of or otherwise deal with so much of the Investments or take all such actions as RBS Coutts deems fit (including, but not limited to, liquidation of the Investments prior to their maturity, conversion of the same into other currencies or conclusion of any spot or forward exchange contract) and apply the Investments or net proceeds thereof against any or all of your Obligations. RBS Coutts shall be entitled to use its discretion in all aspects in relation to the sale or liquidation of the Investments. Any Investments, surplus of cash or cash proceeds held by RBS Coutts and remaining after payment in full of all your Obligations to RBS Coutts shall be delivered or paid to you or your order.

In the result, the final aggregate sum (at the end of the closing out process) of USD 569,109 (“the Outstanding Sum”) became due and owing by the Defendant to the Plaintiff as at 2 September 2008.

6 On or about 17 December 2008, the Plaintiff’s Gary Tucker signed and issued a conclusive certificate of indebtedness pursuant to Clause 58 of the General Terms, certifying the Outstanding Sum to be due and owing from the Defendant to the Plaintiffs (“Conclusive Certificate”). Clause 58 of the General Terms, which authorises the Plaintiff to issue “conclusive evidence” certificates, states:

A certificate signed by any authorised representative of RBS Coutts showing the amount of Obligations from time to time due from you to RBS Coutts shall be conclusive evidence as against you of the amount so owing.

[Emphasis added]

The applicable principles of law

Summary Judgement

7 It hardly bears repeating that once the plaintiff has shown a prima facie case that he is entitled to apply for summary judgment, the onus is on the defendant to show cause why judgment should not be entered (see Singapore Civil Procedure 2007 at 14/2/11). I agree with the observations made by Ackner LJ in Banque de Paris et des Pays-Bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd’s Rep 21 where he remarked at [23]:

It is of course trite law that O. 14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants’ having a real or bona fide defence.

Conclusive Evidence Clauses

8 It is axiomatic that a certificate or statement issued pursuant to a conclusive evidence clause is, in the absence of fraud or manifest error on the face of the certificate, determinative of the amount due. In Bache & Co (London) Ltd v Banque Vernes et Commercials De Paris SA [1973] 2 Lloyd’s Rep 437 (“Bache”) Lord Denning MR said at p 440:

I would only add this: this commercial practice (of inserting ‘conclusive evidence’ clauses) is only acceptable because the bankers or brokers who insert them are known to be honest and reliable men of business who are most unlikely to make a mistake. Their standing is so high that their word is to be trusted. So much so that a notice of default given by a bank or a broker must be honoured. It ranks as equivalent to, if not higher than, the certificate of an arbitrator or engineer in a building contract. As we have repeatedly held, such a certificate must be honoured, leaving any cross-claims to be settled later by an arbitrator. So if a banker or broker gives a notice of default in pursuance of a ‘conclusive evidence’ clause, the guarantor must honour it, leaving any cross-claims by the customer to be adjusted in separate proceedings.

The above articulation of the rationale underlying the legal acceptance of conclusive evidence clauses was approved in Bangkok Bank Ltd v Cheng Lip Kwong [1989] SLR 1154 (“Bangkok Bank”) where Yong Pung How J stated at [18] – [19]:

The widespread use by banks of ‘conclusive evidence’ clauses has arisen simply because of the dictates of commerce, and has been supported by the assumption that money institutions, which are themselves closely regulated by the law, are completely honest and reliable … What is significant is that, in the absence of fraud or obvious error on the face of it, a certificate issued under a ‘conclusive evidence’ clause is conclusive of both the liability and the amount of the debt.

9 Clause 58, however, in my view, does not preclude a legal review by the court into the propriety of the demand itself. In this regard, I agree with the views of V K Rajah J in Standard Chartered Bank v Neocorp International Ltd [2005] 2 SLR 345 (“Standard Chartered Bank”), a decision which was not referred to me by either counsel but certainly warrants a mention. One of the issues which faced Rajah J in Standard Chartered Bank was whether the court is precluded by the terms of the conclusive evidence certificate from reviewing the legal basis of the plaintiff’s claim. Rajah J was of the view at [19] that:

[t]he real foundation for the legal efficacy of such a clause is contract. It can be cogently argued that if parties expressly agree on the modalities for determining a matter, such an agreement should be upheld in the absence of any relevant public policy considerations. Indeed, this is the very basis on which the court recognises and gives effect to arbitration agreements, conclusive certificates of engineers and architects found in construction contracts and experts’ decisions, among others. The High Court of Australia correctly observed in Dobbs’ case at 652 that:

It is not possible for a contract to create rights and at the same time to deny to the other party in whom they vest the right to invoke the jurisdiction of the courts to enforce them. … Parties may contract with the intention of affecting their legal relations but yet make the acquisition of rights under the contract dependent upon the arbitrament or discretionary judgment of an ascertained or ascertainable person.

10 It appears to me that there is a significant degree of variation in the manner in which conclusive evidence clauses are drafted in practice. Indeed, an examination of the authorities cited thus far in this judgment will bolster that view (see also Bangkok Bank at 1159). It is therefore my view that the precise effect of a so-called conclusive evidence clause is dependent on its specific wording and formulation. In the present case, the conclusive evidence clause (Clause 58) is worded as follows:

A certificate signed by any authorised representative of RBS Coutts showing the amount of Obligations from...