Susilawati v American Express Bank Ltd

• Jurisdiction: Singapore
• Judgment Date: 18 October 2007
• Date: 18 October 2007
• Docket Number: Suit No 305 of 2006
• Court: High Court (Singapore)

Susilawati

Plaintiff

and

American Express Bank Ltd

Defendant

[2007] SGHC 179

Lai Siu Chiu J

Suit No 305 of 2006

High Court

Banking–Secrecy–Customer of bank executing charge over account to secure son-in-law's liabilities–Situations where bank could disclose information to guarantor about debtor's liabilities–Civil Procedure–Costs–Whether standard or indemnity costs should be awarded for winning party whose conduct not blameless–Contract–Undue influence–Customer of bank executing charge over account to secure son-in-law's liabilities–Whether presumption of undue influence arising–Equity–Fiduciary relationships–When arising–Customer of bank executing charge over account to secure son-in-law's liabilities–Whether fiduciary relationship arising between bank and customer

The plaintiff, a customer of American Express Bank Limited (“the defendant”), executed a third-party charge (“the Charge”) over all moneys in her account to secure her son-in-law's liabilities to the defendant. Later, as a result of her son-in-law's inability to discharge his liabilities, the defendant deducted a sum of money from the account. The plaintiff commenced an action for losses allegedly incurred from the execution of the charge under two broad heads of claim: (a) undue influence; and (b) breach of fiduciary duty.

Held, dismissing the plaintiff's claim with costs to the defendant on a standard basis:

(1) The plaintiff failed to show that she had reposed such a degree of trust and confidence in her son-in-law so as to allow him to be a position of ascendancy over her, such as to justify the drawing of a presumption that the Charge was executed whilst under his undue influence. The plaintiff did not blindly follow her son-in-law's advice and clearly made independent financial decisions contingent on the type of investments she was open to and the level of risk she was willing to tolerate. The evidence showed that the plaintiff was a resourceful and business-minded person, in contrast to the picture she sought to paint of herself as a housewife with little formal education and no knowledge of financial affairs: at [31] and [46].

(2) Execution of the Charge was explicable in the context of the particular family elements and relationships involved. In particular, the plaintiff was family oriented and close to her daughter, which provided the impetus for her to extend financial help to her son-in-law: at [36] and [37].

(3) The plaintiff was fully aware of the effect and consequences of the Charge and had executed it pursuant to the free exercise of her independent will. The credibility of her evidence to the contrary was undermined by her vacillating stances and the delay in raising the undue influence argument. Furthermore, the court was entitled to and did draw an adverse inference from the plaintiff's failure to call her son-in-law as a witness that, had her son-in-law been called, he would not have corroborated her testimony: at [55] to [57].

(4) The courts should, in the absence of exceptional circumstances, be slow to impose a fiduciary relationship in cases where a surety transaction was undertaken by a customer in favour of the bank. The private banking services afforded by the defendant to the plaintiff and the communications between them were not characterised by an inequality of bargaining power sufficient to give rise to a fiduciary relationship between the parties, who were in essence transacting at arm's length. Furthermore, there was neither advocacy directed at persuading the plaintiff to execute the Charge, nor any form of “overreaching” characterised by non-disclosure of material facts. Finally, the standard terms and conditions of the private banking services arrangement between the parties clearly militated against the plaintiff's allegations regarding the existence of a fiduciary duty: at [62], [63], [66] and [67].

(5) Costs were awarded on a standard, not an indemnity, basis to the defendant as the defendant's conduct was not beyond reproach: at [101].

[Observation: The defendant was aware of the potential conflict of interest between the plaintiff and her son-in-law, who was a remunerated referral agent for the defendant. It was the defendant's lack of vigilance that contributed in no small measure to the present dispute. Unfortunately, information regarding the debts or liabilities that the son-in-law was incurring fell squarely within the ambit of banking secrecy laws: at [72], [76] and [79].

The statutory regime negated the doctrine of implied consent to disclosure. Where a guarantor requested for information, a creditor bank was best advised to ensure that it had the debtor's explicit written authority to override its statutory duties of confidentiality which, if refused, should prompt the intending guarantor to draw the appropriate conclusions. If in doubt, the safest course was to arrange a joint meeting between the guarantor, the debtor and the banker, at which the guarantor might, in the debtor's presence, ask for information concerning the debtor's affairs. Alternatively, a person who was asked to execute a guarantee should be able to insist, as a precondition, that the debtor gave his express consent to the bank to disclose his liabilities to the guarantor both at the time when the guarantee was executed and at periodic subsequent intervals. It was hoped that in time to come, there would be amendments to the Banking Act (Cap 19, 2003 Rev Ed) or new legislation altogether to strike an appropriate and fair balance between the interests of confidentiality for banks and the protection of guarantors of banks' customers: at [94] to [96].]

Allcard v Skinner (1887) 36 Ch D 145 (refd)

Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963 (refd)

Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 (refd)

Bank of East Asia Ltd, The v Mody Sonal M [2004] 4 SLR (R) 113; [2004] 4 SLR 113 (refd)

Cook v Evatt (No 2) [1992] 1 NZLR 676 (refd)

Craig, decd, In re [1971] Ch 95 (refd)

Deepak Fertilisers & Petrochemicals Ltd v Davy McKee (London) Ltd [1999] 1 All ER (Comm) 69 (distd)

Dungey v ANZ Banking Group (NZ) Ltd [1997] NZFLR 404 (refd)

Goodwin v The National Bank of Australasia Ltd (1968) 42 ALJR 110 (refd)

Hamilton v Watson (1845) 12 Cl & Fin 109; 8 ER 1339 (refd)

Litwin Construction (1973) Ltd v Kiss (1988) 29 BCLR (2d) 88 (refd)

Lloyds Bank, Limited v Harrison (1925) 4 LDAB 12 (refd)

Lloyds Bank Ltd v Bundy [1975] QB 326; [1974] 3 All ER 757 (refd)

National Australia Bank Ltd v Nobile (1991) 100 ALR 227 (refd)

Ross v Bank of New South Wales (1928) 28 SR (NSW) 539 (refd)

Royal Bank of Scotland v Greenshields1914 SC 259 (refd)

Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (refd)

Shivas v Bank of New Zealand [1990] 2 NZLR 327 (refd)

Standard Chartered Bank v Elang Mas Enterprise Pte Ltd [2003] SGHC 181 (refd)

Tournier v National Provincial Bank and Union Bank of England [1924] 1 KB 461 (refd)

Truebit Pty Ltd v Westpac Banking Corporation [1997] FCA 1290 (refd)

Union Bank of Australia Limited, The v Puddy [1949] VLR 242 (refd)

Banking Act (Cap 19,2003 Rev Ed)s 47, Third SchedulePt Icl 1

Trade Practices Act1974 (Cth)s 52

Siraj Omar, Tandip Singh and Dian Chen (Tan Kok Quan Partnership) for the plaintiff

Francis Xavier, Boey Swee Siang, Dawn Wee and Ho Hua Chyi (Rajah & Tann) for the defendant.

Judgment reserved.

Lai Siu Chiu J

1 The present suit involves allegations of undue influence and breach of fiduciary duties brought by a customer against a bank for losses allegedly incurred from the execution of a third-party charge.

The facts

2 The plaintiff, Susilawati, is a wealthy Indonesian citizen married to a prominent Indonesian businessman, one Mr Gustimego, until his death in April 2002. Her late husband owned an Indonesian conglomerate known as the Gajah Tunggal group which businesses, inter alia, comprised of rubber re-milling and supply of rubber tyres for vehicles and bicycles, commodities trading, hotels and even the largest private commercial bank in Indonesia known as Bank Dagang Negara Indonesia.

3 The defendant, American Express Bank Limited, is a limited-liability corporation incorporated in the United States of America providing, among other things, private banking services to high-net-worth individuals in Singapore.

4 The plaintiff had been a customer of the defendant's private banking division since 27 August 1997 when she opened an account (“the Account”) with them. On or about 11 February 1998, the plaintiff executed a document entitled “Third Party Liabilities” (“the Charge”), under which the plaintiff granted a charge in favour of the defendant over all moneys in the Account to secure the due and punctual discharge of all moneys, obligations and liabilities due from her son-in-law, Lim Thian Long (“Tommy”), to the defendant.

5 Between 1998 and 2006, Tommy incurred substantial debts to the defendant which consisted of losses from foreign exchange transactions which he effected through his account with the defendant, as well as loans made to him by the defendant. By March 2006, Tommy's liabilities to the defendant, including interest, amounted to a staggering sum of about US$17.4 million.

6 As a result of Tommy's inability to discharge his liabilities, the defendant effected the deduction of a sum of US$17,560,390.98 from the Account pursuant to the terms of the Charge, soon after which the plaintiff commenced this action to recover a sum of US$17,500,605 from the defendant.

The pleadings

7 The plaintiff asserted two causes of action against the defendant, namely: (a) that Tommy had a relationship with the plaintiff of such a nature as to give rise to a presumption of undue influence, and that the plaintiff's signature on the Charge had been procured by this undue influence, of which defendant had actual...