Sheila Kazzaz and another v Standard Chartered Bank

• Jurisdiction: Singapore
• Judge: Judith Prakash JA
• Judgment Date: 13 July 2020
• Neutral Citation: [2020] SGCA(I) 3
• Plaintiff Counsel: Chia Voon Jiet, Grace Lim Rui Si and Sim Bing Wen (Drew & Napier LLC)
• Docket Number: Civil Appeal No 203 of 2019
• Date: 13 July 2020
• Hearing Date: 11 June 2020
• Subject Matter: Banking,Pleadings,Advice,Tort,Negligent,Negligent misrepresentation,Civil Procedure,Misrepresentation
• Year: 2020
• Defendant Counsel: Tan Xeauwei, Daniel Seow Wei Jin, Mak Sushan Melissa and Marrissa Miralini Karuna (Allen & Gledhill LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2020] SGCA(I) 3
• Published date: 17 July 2020

Robert French IJ (delivering the grounds of decision for the court): Introduction

This case arises out of financial arrangements entered into with Standard Chartered Bank (“SCB”) by mother and son, Sheila and Ahmed Kazzaz (“Sheila” and “Ahmed” respectively, and “appellants” collectively). SCB is said to have made misrepresentations, prior to the arrangements being put in place, which constituted breaches of a duty of care owed by SCB, and of provisions of the Dubai International Financial Centre (“DIFC”) regulatory law. The claims were dismissed at a trial in the Singapore International Commercial Court before International Justice Anselmo Reyes (“the trial judge”). The appellants now appeal against that judgment in relation to two of the alleged misrepresentations. Following an oral hearing on 11 June 2020, this court dismissed the appeal and ordered that the appellants pay SCB’s costs fixed at S$80,000 inclusive of disbursements. At the time of announcing its decision, this court informed the parties that it would deliver reasons for its decision at a later date. Those reasons are set out below.

Factual background

The following factual background is based upon findings by the trial judge in his judgment, Sheila Kazzaz and another v Standard Chartered Bank and others [2019] SGHC(I) 15 (“the Judgment”).

The appellants are citizens of the United Kingdom, resident in Dubai. Sheila’s late husband, Ahmed’s father, Sarchil Kazzaz (“Sarchil”), had established a range of businesses operating mostly in Dubai through a group of companies known as the ASK Group. He died in 2007. Ahmed succeeded him as Chairman of the ASK Group.

The property and financial interests of the Kazzaz family were substantial. They included a property known as Ducie Court in Manchester, United Kingdom. Ducie Court was owned by two Liberian companies, held in a trust called the St Bernard Trust, set up by Ahmed in January 2008. The trustee, a company called Hawksford Trustees, had been established under the name Rathbone Trustees Jersey Ltd by Sarchil in the late 1980s.

In April 2010, Ahmed decided he should sell Ducie Court, terminate the St Bernard Trust, place the proceeds with SCB and apply them towards the purchase of a property in London. He met with Harish Phoolwani (“Phoolwani”), an officer of SCB Dubai, on 27 April 2010. Phoolwani suggested that Ducie Court’s sale proceeds might be applied to a property financing arrangement which would enable Ahmed to purchase a property and also generate wealth for the Kazzaz family. The trial judge found that at that meeting Phoolwani had “floated the idea of purchasing [an insurance policy] as part of an arrangement to achieve Ahmed’s objectives”: Judgment at [18].

An email sent by Phoolwani to Ahmed on 28 April 2010 indicated the nature of SCB’s response to Ahmed’s approach: “step by step we are going to present you on creating value add from Standard Chartered Bank Globally” (Judgment at [17]). Phoolwani said he would arrange for Ahmed to meet with Laurence Black (“Black”) of SCB on “[f]iduciary … aspects of [Ahmed’s] wealth.” Phoolwani made a call to Ahmed on 7 May 2010 but there was no further communication between them until August 2010.

Ahmed sent an email to Phoolwani on 5 August 2010 suggesting that they meet to “talk about [his] future investment plan and how [Phoolwani] could best assist [him] with investing the £5m that [he would] net from the property disposal in England”: Judgment at [20]. They met on 8 August 2010. At the meeting, Ahmed said he wanted to establish a private banking account, take the proceeds of the sale of Ducie Court out of existing trust arrangements, and move the sale proceeds to SCB. They had a follow-up telephone conversation to a similar effect on 24 August 2010, and Ahmed subsequently sent the trust deeds of the St Bernard Trust and another Kazzaz family trust (known as the ASK Trust) to Phoolwani. Ahmed provided further details of his existing trust structures on 31 August 2010. A meeting was arranged for 8 September 2010 in Jersey between Ahmed and Clive Harrison, a Senior Fiduciary Specialist in SCB’s London branch (“Harrison”).

The trial judge found that, in their preliminary discussions, the parties explored how SCB’s trust services might be used to hold the Kazzaz’s family assets. It was envisaged that proceeds of the sale of Ducie Court would be deposited in a private banking account with SCB as one element of a financial arrangement towards which they were working: Judgment at [23].

The purpose of the meeting of 8 September 2010, as noted by Black, was to “discuss … [Ahmed’s] concerns and evaluate his/the families [sic] objectives and assets that they wish to retain/place into trust in order to propose a suitable SCB solution.” Ahmed provided Harrison with information about his family’s existing trust structures and its assets in France and Iraq. Harrison recorded Ahmed’s estimate of the value of the Kazzaz family assets as between US$50m and US$60m. The trial judge accepted that record as a probable account of what Ahmed told Harrison: Judgment at [25] and [33]. The trial judge also referred to an Investment Licence dated 6 July 2010 (“the Investment Licence”) held by a company of the ASK Group in Iraq, a copy of which Ahmed sent to Phoolwani on 5 August 2010. The Investment Licence included an undertaking, by Ahmed on behalf of the company involved, to provide a Certificate of Financial Worthiness confirming the company’s financial capability to execute a project involving an investment of US$35m: Judgment at [28] and [31].

At a meeting on 22 September 2010 with Phoolwani, Black and one Mark Jackman of SCB, Black pointed out the difficulties for Ahmed in passing Iraqi and French assets to his two daughters under the applicable shari’a and French inheritance laws. According to Ahmed he was persuaded at that time to establish trusts along lines suggested by Black. Phoolwani and Black had also advised Ahmed at the meeting that the best thing for him to do was to take an insurance policy over his life. After lunch he met with Jyotsna Pandey (“Pandey”) of IPG Financial Services Pte Ltd (“IPG”), since SCB could not advise on or sell life insurance policies (Judgment at [36]). On Phoolwani’s account of that meeting, which was preferred by the trial judge, Pandey explained the features of a universal life insurance policy to Ahmed but referred him back to Phoolwani to discuss financing for the premium which would involve a large upfront payment.

Regarding the issue of financing the premium for the life insurance policy, Phoolwani told Ahmed he could either borrow up to 90% of the Day 1 cash surrender value of the policy and pay the difference between that and the premium, or provide security in cash or assets for the shortfall amount if he were to take out a loan to cover the entire premium. If the Day 1 cash surrender value of the policy dropped, the account might have to be topped up. Ahmed would be able to use the Ducie Court sale proceeds as collateral since he intended to deposit them with SCB (Judgment at [39]). In this judgment, we refer to the loan to finance the premium of the life insurance policy as the “premium loan”.

Black sent an email to Ahmed on 29 September 2010 advising him on how SCB’s services could advance his objectives and on what options were suitable. He included a brochure on SCB’s fiduciary services which it seems Ahmed only flipped through and did not read (Judgment at [47]).

Account opening documents were signed at a meeting between Ahmed, Phoolwani and Black some time prior to 4 October 2010 (Judgment at [48]). The SCB forms which Ahmed signed included a Client Agreement, Client Declaration, Memorandum of Charge and Letter of Indemnity. The Client Declaration involved a representation and warranty by Ahmed that he qualified as a “Professional Client” for the purposes of the Dubai Financial Services Authority Rules and did not elect to be treated as a retail client. The reason for this was that SCB did not have a licence to service retail clients in Dubai. It could only service those who qualified as “Professional Clients” under DIFC law. The Client Declaration included representations by Ahmed that he had “sufficient financial experience and understanding to participate in financial markets in a wholesale jurisdiction (such as the DIFC)”. Moreover, Ahmed acknowledged in the Client Declaration that by making that declaration he would “not be afforded the retail customer protections and compensation rights that may generally be available to … him in other jurisdictions” (Judgment at [52]). A similar declaration appeared in the Client Agreement which he signed (Judgment at [53]). As the trial judge accepted, Phoolwani had explained to Ahmed what being a “Professional Client” meant (Judgment at [55]).

At a separate meeting on 18 October 2010, Sheila signed the Client Agreement, Client Declaration and a Client Investment Questionnaire. She was to be the settlor of a proposed trust intended to hold the life insurance policy, which she named the SAHLK Trust. The trial judge found that Phoolwani went through the documents with Sheila explaining that SCB, not having a retail licence, could only service her and Ahmed as Professional Clients (Judgment at [63]). Sheila commented that she had run the family business in Sarchil’s absence and had also done so when Ahmed was not around. In Sheila’s Client Investment Questionnaire, she had indicated her estimated net worth to be approximately US$39.2m. The trial judge found that in indicating such an estimated net wealth, Sheila’s Client Investment Questionnaire reflected the Kazzaz family wealth as a whole and not just her own. She regarded Ahmed as the head of the family, who ran the family business and handled financial matters for her. She relied upon him to manage her financial affairs. She regarded him as having authority to do...