Top Stories

Singapore Court of Appeal Rules In Favour Of Bank

By Cheng Hock Ang & Xeauwei Tan
Posted: 3rd December 2013 08:42
In the recent decision in Deutsche Bank AG v Chang Tse Wen, the Singapore Court of Appeal overturned the High Court’s decision which allowed a counterclaim against Deutsche Bank (the “Bank”) by Dr Chang Tse Wen (“Chang”) for damages in the sum of about US$49 million and allowed the Bank’s claim to recover approximately US$1.8 million in sums that were outstanding on Chang’s account with the Bank.
The Court of Appeal’s decision is helpful in settling a number of uncertainties arising from the High Court’s judgment, particularly with its rejection of the High Court’s finding that a “pre-contractual duty of care” had arisen.
The Court of Appeal’s decision in this closely watched case provides a timely and welcome clarification on the law to the legal and banking community.  It reflects an appreciation of the commercial realities affecting the private banking industry, particularly in relation to the solicitation of potential clients and the recommendation of investment products.
The decision makes clear that, even as there is greater scrutiny of banks by regulators globally and in Singapore, the Singapore courts will adopt a measured and principled approach to the imposition of any duty of care that materially deviates from the terms of the formal agreements governing the banking relationship.
In March 2007, a relationship manager (the “RM”) from the Bank met Chang to introduce to him the services provided by the Bank’s Private Wealth Management (“PWM”) Unit (the “Introductory Meeting”).  The RM gave a presentation on, among other things, the capabilities of the Bank’s PWM Unit.
At the end of the Introductory Meeting, Chang told the RM he expected to receive about US$118 million following the sale of shares he held in a US company and that he would open an account after he had received the proceeds from the share sale.
In August 2007, shortly before he received the proceeds from the share sale, Chang signed the account application form to open an account with the Bank.  The account application form incorporated a Service Agreement (the “Service Agreement”) which contained various terms governing the relationship between the Bank and Chang.  A number of the terms in the Service Agreement made it clear the account was an execution-only account, i.e.  the Bank had no discretionary mandate.
Thereafter, between 19 November 2007 and 4 February 2008, Chang purchased a large quantity of a financial product, colloquially known as an accumulator, through his account with the Bank.  Chang eventually suffered huge losses (of about US$49 million) which not only wiped out the entire amount he had transferred into the account, but also led to him owing a further sum of about US$1.8 million to the Bank.
The Bank brought proceedings against Chang to claim this amount that was outstanding on his account.
Chang, in turn, counterclaimed against the Bank and raised several allegations to pursue claims for (1) breach of fiduciary duty, (2) beach of duty of care and (3) misrepresentation.  In essence, Chang alleged he had purchased the large quantity of accumulators on the RM’s recommendation and that the RM and the Bank had been remiss in not stopping him from purchasing that many accumulators, thereby exposing his portfolio to “concentration risk”.  The Bank disputed this and pointed to, among other things, the contractual terms governing its relationship with Chang as well as various phone recordings and e-mail messages which suggested that Chang had made his own decision to enter into accumulators.
The High Court dismissed the Bank’s claim and allowed Chang’s counterclaim for breach of duty, awarding him the sum of US$49,047,721.12.  This sum represented the total amount of losses he suffered on his account.
In this regard, the High Court found that the “unusual facts” surrounding the interactions between Chang and the RM at the Introductory Meeting gave rise to a “pre-contractual” duty of care on the Bank’s part to advise Chang on managing his wealth and that, since this duty of care was “pre-contractual” (i.e. it arose before any contractual relationship was entered into), it was not affected by any of the contractual terms in the Service Agreement or the other agreements signed by Chang in connection with his account.  The High Court further found that the Bank breached this “pre-contractual” duty by reason of, among other things, failing to warn Dr Chang against purchasing too many accumulators.
The Bank appealed the High Court’s decision on the duty of care issue.  Chang cross-appealed the High Court’s decision on the misrepresentation issue.
Duty of Care Issue
The Court of Appeal held that the Bank owed no duty of care to Chang to provide him with investment or wealth management advice.
In coming to this conclusion, the Court of Appeal highlighted that Chang’s claim was not about the mis-selling of a financial product.  On the evidence, it could be shown Chang appreciated how accumulators worked and the risks inherent in such instruments.
Rather, as Chang himself acknowledged, his case was that he had not been given sound strategic advice as to the management and structuring of his portfolio and this amounted to a breach of duty on the Bank’s part.
Thus, the Court of Appeal considered whether a duty of care as contended for by Chang had arisen at different stages during the relevant timeline of events.  In this regard, the material question was whether the Bank or the RM had assumed a responsibility to provide financial or investment advice to Chang.  To answer this question, all the facts shedding light on the nature of the parties’ relationship had to be examined, including any contractual arrangements entered into by the parties.
The Court of Appeal observed that the earliest point at which any duty of care could have arisen was in late July 2007, when Chang contacted the RM to open an account with the Bank.  In this regard, the Court of Appeal disagreed with the High Court that there were any “unusual facts” that occurred prior to this or at the Introductory Meeting.  Instead, it held that the relevant circumstances amounted to nothing more than “a commonplace instance of a bank employee soliciting a high net worth individual to open an investment account with the bank”.  The Court of Appeal also placed considerable emphasis on the fact that documents that would typically accompany an advisory relationship of the kind contended for by Chang (such as those specifying details such as the expected rate of return, limits on the nature of investments and the bank’s fee structure) were conspicuously absent.
The Court of Appeal then went on to consider whether a duty of care as contended for by Chang had arisen at the time the account was opened or at any subsequent time.  In this regard, the Court of Appeal found that the totality of contractual arrangements between the parties strongly indicated that the Bank did not undertake any obligation to advise Chang on his investment portfolio or on the management of his wealth.  The Service Agreement and other contractual documents governing Chang’s account made it clear his account was an execution-only account.  The court held that this type of account was inherently inconsistent with an assumption of responsibility by the Bank to provide investment and wealth management advice.  The court also noted that, while the RM had recommended a number of financial products to Chang, these communications did not constitute offers or attempts to offer advice on the structuring of Chang’s portfolio.  Further, the fact that Chang was trading large amounts in other accounts, which he never mentioned to the Bank, proved to be material.  In such circumstances, it could not reasonably be maintained that Chang believed the Bank had assumed a responsibility to advise on the management of his wealth and his overall portfolio.  For these reasons, the Court of Appeal found that no duty of care of the kind contended for by Chang arose at the time the account was opened or at any time thereafter.
Misrepresentation Issue
Chang’s misrepresentation claim was unusual.  Unlike typical claims in private banking disputes, Chang was not alleging that the Bank had misrepresented to him the features and risks of the financial product in question.
Chang’s case was that the Bank, acting through the RM, had misrepresented to him the type of service(s) the Bank would provide if he were to open an account with the Bank.  In this regard, Chang sought to rely on oral statements allegedly made at the Introductory Meeting and certain excerpts from a marketing brochure that the RM had presented to Chang at that meeting.  Chang argued that these statements amounted to a representation that the Bank would provide him with wealth management advice and this was a false representation because the terms in the Service Agreement and the other formal agreements contradicted this.
The Court of Appeal upheld the High Court’s dismissal of Chang’s misrepresentation claim.  The Court of Appeal found that the contents of the marketing brochure were “standard promotional fare” and the disclaimer on the back page of the brochure was “plainly intended” to prevent anyone reading the material from thinking it was meant to be relied upon.
The Court of Appeal also observed that, even if there had been a representation that the Bank would provide advisory or wealth management services, Chang’s claim must fail because he had not proven the Bank or the RM lacked an honest belief in the truth of such statement.  Such absence of honest belief was required because the alleged representation was a statement as to the future (i.e. that the Bank would do something) as opposed to a statement concerning a past of present fact.  According to the Court of Appeal, the mere fact that the Bank did not wish statements made in an introductory meeting to form the basis of any defined obligations on its part did not mean that it was not prepared to enter into an arrangement to provide advisory or wealth management services if that was what Chang wanted.
Whilst the Court of Appeal’s decision can be viewed as a nod to the general practices of banks and financial institutions in the private banking sphere, the case highlights a number of pitfalls that a bank or financial institution would do well to steer clear from.  In particular, the case is a reminder to all service providers in the private banking industry to avoid practices that might overreach and lead to the imposition of a duty of care that extends beyond what is contemplated under the relevant contractual documents.  It is also a reminder to them to better communicate with customers the nature of the services being provided when the customers’ accounts are opened, as these may not be identical to the services earlier introduced to such customers at the time of solicitation.
The Bank was represented by Allen & Gledhill Partners Ang Cheng Hock, SC and Tan Xeauwei.
Cheng Hock’s areas of practice include corporate and commercial disputes, banking and
securities-related litigation, international arbitration, professional negligence, defamation. 
He graduated at the top of his class in 1995 from the National University of Singapore with an LLB (Hons) (First Class) and obtained his LLM in 1998 from Yale Law School.  Admissions: Advocate & Solicitor, Supreme Court of Singapore (1996), Attorney and Counsellor-at-law, New York State (1999). 
In 2009, Cheng Hock became one of the youngest lawyers to be appointed Senior Counsel at the age of 38.  He is constantly recommended for his expertise in commercial litigation and dispute resolution.
Cheng Hock can be contacted by phone on +65 6890 7832 or alternatively via email at
Xeauwei Tan’s practice encompasses international arbitration and civil and commercial litigation, with an emphasis on banking disputes, shareholders’ and partnership disputes and breaches of directors’ duties.  She also represents and advises clients on employment and property disputes as well as regulatory matters.
Xeauwei graduated from the National University of Singapore with an LLB (Hons) degree and passed the Singapore bar examinations as one of the top 10 individuals of her cohort.  She was seconded to Essex Court Chambers in 2008/2009 where she worked with leading English Queen’s Counsel on a range of major commercial litigation and international arbitration disputes in London. 
Xeauwei Tan can be contacted by phone on +65 6890 7843 or alternatively via email at

Related articles

bodrum escort istanbul masöz

Subscribe to our newsletter

Sign up here and get the latest news and updates delivered directly to your inbox

You can unsubscribe at any time