Wee Soon Kim Anthony v UBS AG (No 4)

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 29 July 2004
• Neutral Citation: [2004] SGCA 33
• Court: Court of Appeal (Singapore)
• Year: 2004
• Published date: 06 August 2004
• Plaintiff Counsel: Lim Chor Pee (Chor Pee and Partners)
• Defendant Counsel: Davinder Singh SC, Hri Kumar and Kabir Singh (Drew and Napier LLC)
• Subject Matter: Civil Procedure,Appeals,Appeal against findings of fact by trial judge,Whether findings of trial judge were plainly wrong,Pleadings,Whether re-re-amended statement of claim included particular allegation of the defendant's breaches of duty,Tort,Misrepresentation,Whether any loss occasioned by alleged misrepresentation.
• Citation: [2004] SGCA 33

29 July 2004

Chao Hick Tin JA (delivering the judgment of the court):

1 This was an appeal against a decision of the High Court (in [2003] SGHC 305) dismissing the action of Mr Anthony Wee Soon Kim (“Wee”) against the UBS AG Bank (“UBS”) for damages on account of losses suffered in foreign exchange transactions effected by UBS on his behalf. Wee alleged that the losses he sustained were, in the main, due to misrepresentations and/or failure to exercise care on the part of UBS. We heard the appeal on 27 May 2004 and dismissed it for the reasons that follow.

The background

2 The appellant, Wee, was a senior advocate and solicitor of the Supreme Court of Singapore before he retired from practice in 1997. UBS is a Swiss banking corporation carrying on banking business in Singapore and elsewhere. In 1997 and 1998, Wee was a private banking customer of UBS and had accounts with the bank.

3 Sometime in August 1997, Wee decided to trade on the Malaysian Ringgit (“MYR” or “RM”). On 28 August 1997, Wee instructed Ms Shirreen Sin (“Sin”), an associate director/client adviser with UBS who was assigned by the bank to take care of Wee’s accounts, to enter into a one‑month foreign exchange forward contract. This involved the purchase of RM35m and the sale of US dollars (“USD” or “US$”) at the forward rate of 2.8818. Contrary to expectations, the MYR depreciated after the purchase. On 12 September 1997, Wee met up with Sin as well as another officer of UBS, Mr Collin Koh (“Koh”), a director/investment adviser at the bank, to get their advice on how best to manage his MYR/USD position.

4 On 18 September 1997, with a view to averaging down the cost of the first purchase, Wee asked Sin to enter into another one-month forward contract involving the purchase of RM5m and sale of USD at the forward rate of 3.022.

5 With the benefit of hindsight, that period was the start of the Asian financial crisis. The MYR, together with other Asian currencies, further weakened against the USD. On the maturity of the two forward contracts, instead of realising losses, Wee took out a USD loan from UBS to take up delivery of the RM40m which he placed in leveraged deposits (“LD”). RM35m was placed on a two-month deposit from 3 November 1997 to 5 January 1998 at an interest rate of 8.8% per annum and the remaining RM5m was placed on one‑month deposit from 20 November to 22 December 1997 at a rate of 7.37% per annum. These LDs were held as security for the USD loans granted to Wee.

6 On 16 December 1997, shortly before the one-month deposit was due to mature, Sin and Koh (hereinafter collectively referred to as “the bank officers”) called on Wee to update him on his MYR position. Koh suggested that Wee could realise his losses early by selling his MYR for USD in three to four separate trades over a period of time, taking advantage of interest rate fluctuations. Wee was agreeable but asked for a more concrete proposal for his consideration.

7 Three days later, on 19 December, the bank officers called on Wee again. They informed him that the interest rate for the MYR had fallen and that Wee would, as a result, be facing the prospect of paying more interest on his USD loan than he would be receiving from his MYR deposits (Koh mentioned 6.8% for USD loans and 3.25% for the MYR deposits). In view of this situation, the bank officers suggested that Wee consider subscribing to the UBS Dynamic Floor Fund (“DFF”) strategy which consisted of two components:

(a) the MYR deposits would be converted to USD to invest in DFF. The Fund was capital-protected if held for a 12‑month period and targeted a return of over 8.15% in MYR terms; and

(b) Wee would enter into a 12-month forward contract to purchase MYR at the USD/MYR exchange rate of 3.9745. This forward contract would enable him to have a more favourable exchange rate for his MYR as 12-month forward MYR rates were at a 3% premium to spot rates.

8 In his affidavit of evidence-in-chief, in dealing with the question as to how he explained the DFF strategy to Wee, Koh deposed that:

During the meeting, I carefully explained to [Wee], with the help of some presentation slides, the workings of the DFF Strategy and how it could work to manage his losses. [Wee] approved of the DFF strategy and signed a written instruction that Sin had prepared to invest all his then MYR holdings in the DFF Strategy.

9 A few days later, on 22 December 1997, Wee wrote to Sin as to what he understood to be the features of the strategy:

… It was also agreed that I participate in your [DFF] on the basis of the explanation given by [Koh]. Put simply, it is a scheme whereby I can expect a yield more than if I were to simply deposit the funds in an interest bearing account.

Additionally, it is still open to me to “manage” the funds so invested, e.g., in the interim I can sell the MYR within 3.80 to 3.50 range assuming that for the next 18 months or so the MYR would not return to pre-crisis level. Would you like to amplify on this?

10 The next day, 23 December, the bank officers faxed a detailed reply to Wee and for the purposes of this judgment, we need only quote the following passages:

SBC Dynamic Floor 100% (USD). This will be the underlying asset for the strategy. The SBC Dynamic Floor is a USD denominated Fund. It targets a benchmark return of USD 12-month Euro-bid rate (this is 5.82% at the moment). In Ringgit terms, adjusted for costs, this translates to 8.15% at a spot USD/MYR rate of 3.80 on expiry of the 12-month period. The Fund is traded on a daily basis and can be liquidated theoretically any time. In practice, it is advisable to hold the fund for a medium term period of 6-12 months.

…

USD/MYR forward foreign exchange contracts: This is the second part of the strategy. On the subscription to the SBC Dynamic Floor Fund which is in USD, a 12-months forward foreign exchange contract buying Malaysian Ringgit and selling USD is entered into. This forward foreign exchange contract may be unwound anytime. 12-month forward Malaysian Ringgit trades at approx 3% premium to the spot or current rates.

…

The precise timing of selling the Ringgit (or unwinding the original purchase) will be done in consultation with yourself. Selling the Ringgit would leave open the underlying USD exposure of the SBC Dynamic Floor Fund. A suggested tentative strategy might look like: Sell MYR 10 million at 3.60, Sell MYR 10 million at 3.55, Sell MYR 10 million at 3.50, Sell MYR 10 million at 3.40. Each time we sell MYR, we would be squaring off and hence assuming the underlying USD exposure of the Fund. In a trading environment where the Ringgit trades in a range of 3.30 to 3.90, there will be opportunities to buy back the Ringgit at lower levels perhaps in the 3.80 area. Effective management of the Ringgit exposures will have the effect of improving the original 2.90 approx cost of your initial Ringgit position.

11 Also on the same day, the bank officers called on Wee and went through their proposal carefully. Wee wanted his son, Richard, to be involved in the matter before he made up his mind, therefore, Koh met Wee and Richard on 26 December 1997. Although Wee denied there was such a meeting on 26 December, Richard deposed that he was present at a meeting with Wee and Koh, thus affirming the events recounted by Koh.

12 On 5 January 1998, following the proposal, Wee converted his MYR deposits into USD and after deducting a 1% transaction fee, the balance of US$10,439,832.63 was invested in the DFF. The next day, 6 January, a forward contract to buy RM41,493,114.79 for value was entered into at the rate of 3.9745 and at the cost of US$10,439,832.63.

13 On 14 May 1998, after discussing with Koh on the telephone, Wee instructed Koh to sell RM11, 520,000 at the rate of 3.84 to US$1 and to buy US$3m. The object of this transaction was to unwind, in part, the 12‑month forward contract. However, the next day, on Koh informing Wee that swap costs would be involved in the sale, Wee was upset and instead asked Koh not to proceed with the previous day’s instruction. This unravelling resulted in an exchange loss of some US$63,500 for Wee.

14 On 9 June 1998, the seed for litigation was sowed. Wee wrote to UBS to complain that he invested into the DFF because of material misrepresentations on the part of the bank officers. He alleged that he was not aware that “swap points” were involved if he should close his MYR position early. Some correspondence and meetings ensued after the complaint but nothing conclusive could be reached between the parties. However, it was agreed that Sin’s supervisor, Mr Nicholas Wood, would henceforth take over as Wee’s relationship manager and deal with Wee in place of Sin.

15 On 8 July 1998, UBS advised Wee that he would stand to make a profit of RM898,020.35 if he were to liquidate the DFF and exit the 12‑month forward contract. While reserving his rights in relation to his complaint on misrepresentation, Wee accepted the advice. This resulted in Wee receiving RM41,721,419.54, a net gain of RM915,245.71. However, Wee’s gain would have been much more if not for the fact that in unwinding the forward contract, a swap cost of more than RM2,000,000 was incurred.

16 On 1 September 1998, the Malaysian government imposed a ban on the trading of MYR. The next day, Bank Negara Malaysia fixed the exchange rate for MYR at 3.80 to US$1. The upshot of it all was that eventually, Wee’s entire MYR holding was converted to only US$10,555,155. Taking into account the original USD loan sum, plus the interest incurred, Wee’s foray into the MYR market left him with a total loss of US$4,179,509.

17 On 4 July 2001, Wee commenced legal proceedings against UBS claiming, inter alia, damages for misrepresentation, breach of duty of care in contract and in tort and breach of fiduciary duties. The statement of claim was subsequently amended on several occasions. In his final submission, Wee identified the following four issues for the consideration of...