"Cleaning up the paperwork"

This is not a euphemism for a party's reluctant approach to discovery. Rather, it is an observation by the Singapore Court of Appeal in its judgment in Deutsche Bank AG v Chang Tse Wen [2013] SGCA 49.

Readers may recall that in the Chang case ("Industry Insights", April 2013), the Singapore High Court allowed Chang's claim, primarily on the basis that it found the bank: (i) had assumed a pre-contractual duty to advise Chang as to his wealth management; and (ii) had breached that duty by reference to Chang's trading in forward accumulator share trades.

That judgment raised a few eye-brows because the duty to advise was found to arise despite the client service agreement confirming that the bank was providing execution only services and there being no advisory agreement.

The bank's confidence in its appeal was well founded when the Singapore Court of Appeal last year overturned the judgment. Some brief take-away points include:

  • when considering whether a pre-contractual duty of care arises, common law courts will usually have regard to the whole "factual matrix";
  • the absence of a written advisory agreement points to there being no duty to advise;
  • the line between advisory or non-advisory services can be a fine one. However, merely introducing investment products and opportunities in a private banking context does not (of itself) constitute investment advice;
  • even if the bank owed an advisory duty, it was not in breach by failing to warn Chang of risks associated with accumulators because he could have calculated those risks as a matter of simple arithmetic (Kwok v HSBC Private Bank (Suisse) SA [2012] HKEC 903, considered);
  • given that no advisory duty was found to exist, it was unnecessary to consider the judge's finding that the bank could not rely on contractual disclaimers because Chang was unaware of them. However, the Singapore Court of Appeal doubted the judge's analysis of the state of the law on contractual estoppel.

The Singapore Court of Appeal's judgment is consistent with similar cases in other common law jurisdictions (in particular, Hong Kong). While banks may rest easier, there are lessons to be learned. For example, while expressing some sympathy for Chang, the Singapore Court of Appeal suggested that banks would do better by:

  • communicating with customers clearly as to what services are and are not being provided;
  • "cleaning up the paperwork"; for example, by ensuring that contractual disclaimers are brought to customers' attention before signature and being able to document that.


- Jonathan Cary, Partner, RPC