High Court · Decided 3 May 2012

Crédit Industriel et Commercial v Teo Wai Cheong

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[2012] SGHC 94Case no. Suit No 626 of 2008

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Evidence Act 1893

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Chan Seng Onn J:
Introduction
[1] This case highlights the problems that arise when phone conversations between a bank’s relationship manager and a client, during which the client may instruct the relationship manager to make investments on his behalf, are not recorded. The main issue is whether an investor instructed his relationship manager to purchase financial products known as accumulators on his behalf, thereby making him liable to make payments associated with these accumulators.
Background
Parties
[2] The plaintiff, Crédit Industriel et Commercial (“CIC”), is a French bank registered as a foreign company in Singapore, and it carries on a private banking business in Singapore.
[3] The defendant, Mr Teo Wai Cheong (“Teo”), is a former private banking client of CIC. Teo’s relationship manager at CIC was one Ms Ng Su Ming (“Ng”). Ng had also been Teo’s relationship manager at Citibank from 2004 to 2006. When Ng left Citibank for CIC in 2006, she persuaded Teo to open a private banking account with CIC.
Facts
Overarching contracts between CIC and Teo
[4] In the course of opening a private banking account with CIC, Teo signed three standard form contracts with CIC. These formed the overarching contractual documents governing the relationship between CIC and Teo.
(1) Account Opening and Custodian Agreement
[5] On 11 August 2006, Teo opened a private banking account with CIC by signing CIC’s Account Opening and Custodian Agreement (Natural Persons) (“Account Opening and Custodian Agreement”), which consists of the following:
(a) The Terms and Conditions of the Account Opening and Custodian Agreement;
(b) The Risk Disclosure Statement; and
(c) The Terms and Conditions for Treasury Services.
[6] The clauses in the Terms and Conditions of the Account Opening and Custodian Agreement which are relevant to this suit are as follows:
(a) Clause 6.03:
(b) Clause 23.02:
(c) Clause 24:
(d) Clause 25.04:
[7] The portions in the Risk Disclosure Statement which are relevant to this suit are as follows:
(a) Introduction:
(b) Paragraph 8 titled “Margin Trading”:
(c) Paragraph 16 titled “Further Risks”:
(d) Acknowledgment of receipt of the Risk Disclosure Statement, which was separately signed by Teo:
[8] The clauses in the Terms and Conditions for Treasury Services which are relevant to this suit are as follows:
(a) Clause 6.1:
(b) Clause 6.2(a):
(c) Clause 1.2:
(d) Clause 8.2:
(e) Clause 9.1:
(f) Clause 11.1.4:
(g) Clause 11.1.5:
(2) Banking Facility Letter and Charge Agreement
[9] Teo also signed CIC’s Banking Facility Letter and CIC’s Charge Agreement (Natural Persons) (“Charge Agreement”), both dated 29 September 2006. In the Banking Facility Letter, CIC confirmed granting to Teo pursuant to his request a loan facility of up to US$5 million, an amount of up to US$5 million to facilitate his entering into Treasury Contracts and an amount of up to US$5 million to facilitate his entering into Margin Trading Transactions. The clause in the Banking Facility Letter which is relevant to this action is clause 1 titled “Loan Facility”. This clause states, inter alia, the following:
[10] In the Charge Agreement, Teo provided CIC with a fixed charge and lien against his deposits and investment portfolio as a continuing security for due and punctual payment of all moneys owed to CIC. The clauses in the Charge Agreement which are relevant to this suit are as follows:
(a) Clause 6 titled “Enforcement of Security”:
(b) Clause 9 titled “Lien”:
Accumulators purchased under Teo’s account
[11] In July 2007, Ng introduced to Teo a new investment product called the equity accumulator. It is convenient at this point to refer to the description of an equity accumulator found in CIC’s Statement of Claim (Amendment No. 3), while keeping in mind that the precise features of any given accumulator will vary according to the terms of the contract by which it is established:
[12] According to CIC, the typical process by which Teo would purchase accumulators through Ng is as follows:
(a) First, Ng would call CIC’s Private Banking Advisory department (“PBA”) to obtain the current market price of a particular share counter and the indicative forward and knock-out prices of the related accumulator;
(b) Second, Ng would (i) convey to Teo the recommendations of research analysts on the share counter and the indicative forward and knock-out prices of the related accumulator; and (ii) obtain Teo’s instructions on the range of the indicative initial, forward and knock-out prices and the approximate range of the maximum obligation within which Teo was willing to purchase the accumulator (it is noted that Teo disputes (b));
(c) Third, Ng would repeat (b) in relation to her other clients;
(d) Fourth, Ng would contact PBA to place either (i) a consolidated order for an accumulator on the share counter at certain initial, strike and knock-out prices; or (ii) several orders for several accumulators on the same share counter at different initial, strike and knock-out prices;
(e) Fifth, PBA would place Ng’s order(s) with CIC’s counterparties, such as DBS Bank and Goldman Sachs, and then inform Ng if and when the order(s) has been filled;
(f) Sixth, Ng would allocate to each client his proportion of the accumulator(s) in accordance with his instructions, and Ng’s Client Support Officer would record the allocation in CIC’s system; and
(g) Seventh, CIC would send confirmation notes and term sheets detailing the terms of the accumulators purchased by its clients to their residential addresses.
This process results in two sets of contracts. The first set is formed when CIC enters into accumulator transactions with other banks and the second set is formed when CIC subsequently enters into accumulator transactions with its clients. Under the first set of contracts, CIC’s counterparties are obliged to deliver shares to CIC in return for payment. Under the second set of contracts, CIC is obliged to deliver shares to its clients, who are obliged to pay for them.
[13] Between 20 July 2007 and 3 October 2007, twenty equity accumulators were purchased under Teo’s CIC account. These transactions are listed in the table below:
Table of Accumulators
[14] The subject matter of this suit is the last five CE accumulators, i.e. entry numbers 15 to 19 in the Table of Accumulators. These will be referred to individually as the Third, Fourth, Fifth, Sixth and Seventh CE Accumulators respectively (given that the First and Second CE Accumulators, being the non-disputed accumulators at entry numbers 12 and 14 respectively in the Table of Accumulators, were established earlier) or collectively as the “Disputed Accumulators”. In this case, CIC claimed that Teo instructed Ng to purchase the Disputed Accumulators on his behalf, whereas Teo denied this. Apart from this central dispute, CIC and Teo also presented two very different versions of events. I will first set out their respective cases before I make findings on what, on a balance of probabilities, had transpired between the parties.
Plaintiff’s case
[15] I now set out CIC’s version of the events. On 2 October 2007, CIC established the Third to Sixth CE Accumulators pursuant to Teo’s instructions, that is, within the range of the indicative initial, forward and knock-out prices and with the maximum obligation which Teo agreed to. This was after:
(a) Ng provided Teo with information on CE shares, including recommendations of research analysts from various brokers and/or financial institutions; and
(b) Teo instructed Ng to purchase CE accumulators where:
(i) the indicative initial price would be approximately between S$1.75 and S$1.82;
(ii) the indicative forward price would be between 89.25% and 91% of the initial price;
(iii) the indicative knock-out price would be between 102% and 103% of the initial price; and
(iv) the maximum obligation would be approximately S$6 million.
CIC then sent Teo term sheets, confirmation notes and statements of accounts detailing the terms of the Third to Sixth CE Accumulators.
[16] On 3 October 2007, CIC established the Seventh CE Accumulator pursuant to Teo’s instructions, that is, within the range of the indicative initial, forward, and knock-out prices and within the range of the maximum obligation which Teo agreed to. This was after:
(a) Ng provided Teo with information on CE shares, including recommendations of research analysts from various brokers and/or financial institutions; and
(b) Teo instructed Ng to purchase a CE accumulator where:
(i) the indicative initial price would be approximately between S$1.64 and S$1.70;
(ii) the indicative forward price would be approximately 90.7% of the initial price;
(iii) the indicative knock-out price would be approximately 103% of the initial price; and
(iv) the maximum obligation would be approximately between S$4 and S$5 million.
CIC then sent Teo term sheets, confirmation notes and statements of accounts detailing the terms of the Seventh CE Accumulator.
[17] Also on 3 October 2007, CIC established the Sembcorp Marine accumulator (“Sembcorp Accumulator”) pursuant to Teo’s instructions, that is, within the range of the indicative initial, forward, and knock-out prices and with the approximate range of the maximum obligation which Teo agreed to. This was after:
(a) Ng provided Teo with information on Sembcorp shares, including recommendations of research analysts from various brokers and/or financial institutions; and
(b) Teo instructed Ng to purchase a Sembcorp Accumulator where:
(i) the indicative initial price would be approximately between S$5.20 and S$5.40;
(ii) the indicative forward price would be approximately 90.1% of the initial price;
(iii) the indicative knock-out price would be approximately 103% of the initial price; and
(iv) the maximum obligation would be approximately S$3.1 million.
CIC then sent Teo term sheets, confirmation notes and statements of accounts detailing the terms of the Sembcorp Accumulator.
[18] Thereafter, CIC’s case was that it repeatedly asked Teo to remit additional funds to his account for the Disputed Accumulators and Teo responded by reassuring CIC on several occasions between 18 October 2007 and 13 November 2008 that he would comply with his obligations under the Disputed Accumulators and would pay for the CE shares delivered to him under those accumulators. On 5 November 2007, Teo agreed to provide CIC with a cheque of S$160,000 to acquire some of the CE shares delivered under the Disputed Accumulators, and on 7 November 2007, CIC received this cheque. On 16 November 2007, Teo instructed CIC to sell 180,000 CE shares which he had acquired under the First to Seventh CE Accumulators and to use the sale proceeds to pay for some of the CE shares which had been delivered to him under the Disputed Accumulators. However, there were still sums due from Teo to CIC for shares delivered under the Disputed Accumulators which remained outstanding.
[19] According to CIC, Teo did not raise any issue about the Disputed Accumulators until 20 November 2007 at a meeting with Ng and the head of CIC’s private banking department, Mr Paul Kwek (“Kwek”). Even at the meeting, Teo did not deny that CIC had entered into the Disputed Accumulators pursuant to his instructions.
[21] CIC claimed that the outstanding amounts due from Teo to CIC for CE shares accumulated pursuant to the Disputed Accumulators as of the various closing-out dates were as follows:
[22] Subsequently, CIC exercised what they claimed to be their rights pursuant to clause 24 of the Account Opening and Custodian Agreement and clauses 6 and 9 of the Charge Agreement to:
(a) realise the following assets held in Teo’s account; and
(b) apply the sale proceeds towards settlement of the total outstanding amount due from Teo to CIC under the Disputed Accumulators, i.e. S$8,193,773.33 being the sum of the closing-out costs (see table at [20]) and the outstanding amounts for the CE shares accumulated under the Disputed Accumulators (see table at [21]).
After the set-off, the total outstanding amount due from Teo to CIC was S$6,408,196.77 (S$8,193,773.33 minus S$1,785,576.56).
[23] As Teo had insufficient funds in his account and failed to pay the total outstanding amount of S$6,408,196.77, CIC extended various loans to Teo to cover this sum, which CIC had paid to its counterparties. On 27 May 2009, CIC issued a conclusive certificate of indebtedness pursuant to clause 1 of the Banking Facility Letter certifying that the total amount due from Teo to CIC as of 29 August 2008 was S$6,459,519.83, being the sum of the principal (S$6,408,196.77) and the total interest accrued (S$51,323.06). Thereafter, CIC instituted the present suit to claim this amount from Teo.
[24] Apart from arguing that Teo had in fact authorised the purchase of the Disputed Accumulators, CIC raised an alternative argument that Teo was estopped from denying that he authorised the purchase because he did not raise any issue about these accumulators until around 20 November 2007, despite having received the term sheets, confirmation notes and statements of account detailing the terms of the accumulators at around 16 October 2007. Even at the 20 November 2007 meeting, Teo did not deny that CIC had entered into the Disputed Accumulators pursuant to his instructions. Teo’s silence and inaction, CIC argued, induced CIC to believe that the Disputed Accumulators were authorised by him and led CIC to continue paying for the CE shares delivered under the terms of the Disputed Accumulators. Further, at CIC’s request, Teo remitted additional funds for the purchase of CE shares under the Disputed Accumulators thereby affirming his obligations under the Disputed Accumulators.
Defendant’s case
[25] Teo’s case was that Ng had purchased the Disputed Accumulators and the Sembcorp Accumulator without his knowledge or authorisation. Teo claimed that Ng had not obtained instructions from him on the range of indicative initial, forward or knock-out prices or the approximate maximum obligation in respect of the Disputed Accumulators and the Sembcorp Accumulator.
[26] Teo’s version of the events is as follows:
(a) On 11 October 2007, Ng telephoned Teo to request for funds to enlarge his account but did not mention the Disputed Accumulators and the Sembcorp Accumulator.
(b) On 16 October 2007, Ng contacted Teo and requested Teo to place more funds with CIC for accumulator transactions. When queried, Ng revealed that she had entered into the Disputed Accumulators and the Sembcorp Accumulator for Teo, and that the maximum exposure under these transactions was about S$9 million. Teo was shocked and told Ng that she had no authority to enter into these transactions. He informed Ng that he was not going to accept these transactions and instructed her not to enter into further accumulator transactions on his behalf.
(c) On 18 October 2007, Ng contacted Teo and informed him that the Sembcorp Accumulator had been knocked out. At Ng’s request, Teo agreed to accept the Sembcorp Accumulator transaction. Ng then informed Teo that the maximum exposure for the Disputed Accumulators was 13,500 shares per day and requested that Teo accept the transactions but Teo refused to do so. Teo then requested Ng to furnish him with a breakdown on all previous accumulators done under his account. At Ng’s request, Teo agreed to give her a month to resolve the issue of the Disputed Accumulators with her superiors. Thereafter, Teo waited for Ng’s reply.
(d) On 5 November 2007, Ng requested for a sum of S$160,000 to pay for the First CE Accumulator, the Second CE Accumulator and the Sembcorp Accumulator. Teo complied and issued a cheque for the said sum to CIC.
(e) On 13 November 2007, Ng informed Teo that her superiors had lectured her and wanted her to persuade Teo to reassign the accumulators to his other investment account, mortgage his house or transfer more funds from his Citibank account. Teo refused to accept the Disputed Accumulators transactions and maintained that they were unauthorised (i.e. he never gave Ng any instructions to enter into the Disputed Accumulator transactions and Ng basically went on a frolic of her own to purchase those Disputed Accumulators without his knowledge.) On the same day, Ng sent an e-mail to Teo, attempting to persuade Teo to accept the Disputed Accumulators by attaching a Merrill Lynch Report on CE.
(f) On 15 November 2007, Ng telephoned Teo and made a further attempt to persuade him to accept the Disputed Accumulator transactions. Teo refused and reminded Ng to produce a detailed breakdown on all previous accumulators done under his account. In view of the declining stock market and with a view to terminating his dealings with CIC, Teo also instructed Ng to sell the CE shares accumulated under the First and Second CE Accumulators as well as his Neptune Orient Line shares. Ng also sent an e-mail to Teo, attaching further information on CE and Teo replied via e-mail that the attachment was old news. Teo also stated that the investment was risky and “banging so hard on a company like CE was something I will never do.”
(g) On 19 November 2007, Ng contacted Teo and revealed for the first time that the number of shares to be accumulated would double if the market price of the share were to fall below the discounted price, and hence Teo had to accumulate 27,000 shares per day under the Disputed Accumulators. Ng informed Teo that CIC had insisted that Teo accept the Disputed Accumulators, reassign the accumulators to his other investment account, mortgage his house or transfer more funds from his Citibank account. Teo refused.
(h) On 20 November 2007, Teo met with Kwek to complain about the Disputed Accumulators. Teo informed Kwek that although he had instructed Ng to limit his exposure in accumulators to about $1 million, Ng had entered into CE accumulators way in excess of the limit and the authority given to her. Kwek did not want to commit on the matter and arranged for Teo to meet with CIC’s general manager.
[28] Finally, Teo counterclaimed against CIC. Teo argued that CIC had wrongfully realised his assets and/or set off his monies maintained with CIC, and that CIC was obliged to repay all such sums and monies due and owing to him. Teo also claimed damages in respect of what he claimed to be the wrongful liquidation of his assets with CIC.
History of the case
[29] This suit was first tried before a Judicial Commissioner, who found that Teo had instructed Ng to purchase the Disputed Accumulators and gave judgment for CIC on its claims (see Crédit Industriel et Commercial v Teo Wai Cheong [2010] 3 SLR 1149). Teo then lodged an appeal against the Judicial Commissioner’s decision.
[30] On appeal, the Court of Appeal was of the view that CIC should disclose certain information and documents, which related to orders for the Disputed Accumulators made by CIC’s other clients – identified as “Client A”, “Client B” and “Client C” – and which were previously withheld on the ground of banking secrecy, because such evidence was relevant in the light of Ng’s practice of consolidating orders and because such disclosure would not breach banking secrecy. Accordingly, the Court of Appeal exercised its powers under s 37(4) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) and directed CIC to produce copies of the following transcripts/documents (with only the names of CIC’s clients or former clients and/or account numbers redacted where necessary to prevent their identification) (“Newly Disclosed Materials”) (see Teo Wai Cheong v Crédit Industriel et Commercial [2011] SGCA 13 at [24]):
[31] CIC duly disclosed these materials and parties made submissions on the relevance of the Newly Disclosed Materials. As the Court of Appeal was unable to conclude that the findings of fact of the Judicial Commissioner would have been the same if he had seen the Newly Disclosed Materials, or if they had been subjected to cross-examination by counsel for Teo, it set aside the judgment of the Judicial Commissioner and ordered that a new trial be fixed. Accordingly, a re-trial was fixed before me.
The re-trial
Ng’s evidence
[32] On the first day of the re-trial, CIC informed the court that Ng would not be appearing in court as a witness for CIC during the re-trial. CIC applied for Ng’s affidavits of evidence-in-chief and her oral evidence from the first trial to be admitted as evidence for the re-trial pursuant to section 33 of the Evidence Act (Cap. 97) (“EA”) on the basis that she could not be found. I allowed the application and I now give my reasons.
[33] Section 33 of the EA states the following:
[34] For the first trial, Ng filed an affidavit of evidence-in-chief and a supplementary affidavit of evidence-in-chief and both were admitted into evidence. Ng also took the stand and was cross-examined under oath by Teo’s counsel on all aspects of the affidavits. It is clear that all of this evidence is “evidence given by a witness in a judicial proceeding” and is “relevant for the purpose of proving” in this re-trial, which is “a subsequent judicial proceeding”, “the truth of the facts which it states”. Teo did not dispute that the first trial and the re-trial are proceedings between the same parties, and that the questions in issue are substantially the same, given that neither party has amended its pleadings. The real fight occurred over the issues of whether Ng “cannot be found” and whether Teo could be said to have “had the right and opportunity to cross-examine” Ng on all relevant matters during the earlier judicial proceedings in view of the fact that the Newly Disclosed Materials were not made available then.
[35] CIC argued that Ng, who to its knowledge was resident in Dubai, could not be found because after a re-trial of this suit was ordered on 11 April 2011, CIC made the following attempts to locate her to no avail:
(a) On 16 May 2011, CIC tried to contact Ng on her Dubai mobile phone number and her Singapore mobile phone number but failed. CIC also sent an e-mail to Ng’s last known e-mail address but did not get any response.
(b) On 16 June 2011, CIC’s representative, Kwek, visited Ng’s parents’ residence in Singapore, where Ng used to reside when she was based in Singapore, but Ng’s father said that he did not know how to contact Ng. Kwek told Ng’s father to ask Ng to contact CIC if he managed to speak to her. However, Ng did not contact CIC.
(c) On 26 July 2011, CIC issued a subpoena to testify against Ng and on 29 July 2011, attempted but failed to serve the subpoena on Ng at her parents’ residence in Singapore. Further attempts to serve the subpoena on Ng on 7 August 2011 and 13 August 2011 were also unsuccessful.
(d) In the period of 15 August 2011 to 22 August 2011, CIC’s representative visited Café Paparotti, a restaurant in Dubai where Ng was last known to be working at, but was told that Ng no longer worked at the restaurant.
(e) On 7 September 2011, CIC sent a letter by courier to Ng’s last known address in Dubai but was informed that the letter could not be delivered to Ng. On the same day, CIC sent a letter addressed to Ng to her parents’ residence in Singapore but did not receive an acknowledgment of receipt of the letter.
(f) On 9 September 2011, CIC sent a letter to Ng’s parents requesting their assistance in contacting Ng but did not receive an acknowledgment of receipt of the letter.
(g) On 24 September 2011, CIC’s representative visited Ng’s parents’ residence but was unable to contact Ng or her parents.
(h) On 28 September 2011, CIC placed an advertisement in The Straits Times requesting for Ng to contact CIC. CIC also arranged for a similar advertisement to be published in an English newspaper in Dubai.
(i) CIC received advice from Dubai counsel that without knowledge of Ng’s present address, there is no procedure under Dubai law to compel Ng to give evidence in the court of a foreign jurisdiction, or for evidence given in a Dubai court to be used in foreign proceedings.
[36] Teo’s counsel, in turn, argued that the “cannot be found” limb of s 33 of the EA required CIC to use its best efforts to locate Ng and that CIC had not done so. He argued that CIC, being a big international bank, should have hired a private investigator in Singapore and/or Dubai to find out where Ng was. Teo’s counsel ventured to suggest that CIC was not keen on Ng returning to court and facing further cross-examination, and that CIC would rather have Ng’s evidence be accepted without having been tested against the Newly Disclosed Materials. In particular, he highlighted one of these documents, a draft e-mail dated 19 November 2007 which Ng meant to send to Teo but never did (the “Draft E-Mail”), and the comments which the Court of Appeal made on it. I set out this e-mail in full:
Teo pointed out that one of the reasons which the Court of Appeal gave for ordering a re-trial was that the italicised words in the Draft E-Mail “may or may not support Ng’s evidence. They are ambiguous and Ng should testify and be cross-examined on what she meant by those words”.
[37] There is no local case authority on the meaning which ought to be given to the phrase “cannot be found” in s 33 of the EA. For guidance on this matter, it is useful to refer to the commentary on a substantially similar provision, s 33 of the Indian Evidence Act 1872, in Sarkar’s Law of Evidence (Sixteenth Edition) (2007) (Volume 1) at page 853:
I agreed that “due diligence”, instead of “best efforts” as Teo’s counsel proposed, is a more appropriate threshold for the “cannot be found” limb of s 33 of the EA, as it could not have been Parliament’s intention to require a party to show that it has spared no time and expense in its search, in order to qualify under s 33 of the EA. On the facts of this case, I found that the requirements of s 33 of the EA for admitting the evidence of Ng at the first trial were met. I found that CIC had used due diligence by exploring many avenues and expending much time and effort in its search for Ng from the time that the Court of Appeal ordered a re-trial to the time of the commencement of the re-trial. I did not think that s 33 of the EA went so far as to require a private investigator to be hired in this case and Teo’s counsel was not able to produce any authority to the contrary. Further, there was nothing in the evidence to show that CIC’s search was not bona fide, and I did not accept the suggestion that CIC might have been quite happy for Ng not to testify at the re-trial. In fact, Ng’s absence could equally be seen as CIC’s lost opportunity to ask Ng to explain the ambiguities which the Court of Appeal found in the Newly Disclosed Materials.
[38] On the issue of whether Teo had in the first trial the right and opportunity to cross-examine Ng on the evidence which is sought to be admitted, CIC submitted that Teo had this right and opportunity and in fact did cross-examine Ng comprehensively on the contents of her affidavits. On the other hand, Teo submitted that this limb of s 33 of the EA was not fulfilled because Teo’s counsel only had the opportunity to cross-examine Ng against the documents that were before the court at that time; he did not have the opportunity to cross-examine Ng against the Newly Disclosed Materials. Again, Teo’s counsel emphasised the Draft E-mail and the comments which the Court of Appeal made on it.
[39] Certainly, it would be ideal if Ng was present as a witness before me to give evidence afresh. She could then, in her affidavits of evidence-in-chief for the re-trial, deal with the Newly Disclosed Materials and be asked to explain any ambiguities and discrepancies. Teo’s counsel would then have the full opportunity to cross-examine Ng against the backdrop of all the documents before this court for the re-trial, including the Newly Disclosed Materials. More importantly, I would have been able to observe her demeanour as a witness whilst testifying under oath before me. However, given that Ng cannot be found, in my opinion through no fault of either CIC or Teo, the question is where we should go from here. It cannot seriously be argued that the Court of Appeal meant to say that if Ng could not be cross-examined on the Draft E-Mail and on the other Newly Disclosed Materials, then all of the evidence that she had previously given, and on which she had been cross-examined at length by Teo’s counsel during the earlier trial, should be excluded entirely. Surely the more sensible approach would be to admit the evidence that she had given at the first trial and, when deciding what weight to give it, to consider that there are also the Newly Disclosed Materials which may or may not support her evidence, together with whatever submissions which the parties may make on these materials. In any event, I am of the view that provision (b) in s 33 of the EA has been sufficiently satisfied on the facts to allow Ng’s evidence to be admitted in the re-trial before me.
Issues
[41] The issues in this case are as follows:
(a) First, whether Teo instructed Ng to purchase the Disputed Accumulators on his behalf.
(b) Second, if (a) is answered in the negative, whether Teo is estopped from denying that he had authorised Ng to purchase the Disputed Accumulators on his behalf.
(c) Third, if (a) or (b) is answered in the positive, what CIC is entitled to claim from Teo.
(d) Fourth, if (a) and (b) are answered in the negative, what Teo is entitled to claim from CIC.
My decision
Whether Teo instructed Ng to purchase the Disputed Accumulators on his behalf
[42] I will now consider the evidence before this court and determine if it is, on the whole, more consistent with CIC’s case (see [15] to [24] above) or Teo’s case (see [25] to [28] above), and whether CIC has proved on a balance of probabilities that Teo had instructed Ng to purchase the Disputed Accumulators on his behalf.
Events of 2 October 2007
[43] On 2 October 2007, there were various recorded telephone conversations between Ng and one “Lillian” from CIC’s PBA, and transcripts of these conversations have been provided. According to Ng’s and Teo’s telephone records, there were also telephone conversations between Ng on the one hand and Teo, Client A, Client B and Client C on the other. These calls were not recorded. Ng and Teo have given evidence on what was said during the calls between them but there is no evidence on what was said during the calls between Ng and her other clients. From the evidence, the chronology of events on 2 October 2007 which are material to this dispute is as follows:
Table of Events of 2 October 2007
[44] The allocation of the Third to Sixth CE Accumulators among Ng’s four clients, according to CIC, is set out in the following table:
Table of Allocation
[45] The “average” and “weighted average” prices of the 7,500 CE accumulator shares per day allocated to Teo are as follows:
The average initial price and the more accurate weighted average initial price (if that is preferred) are both within the range of indicative initial price that CIC said Teo agreed to, i.e. S$1.75 to S$1.82.
[46] The first hurdle which CIC has to cross to prove its case is to show that there was an opportunity for Teo to give Ng instructions to purchase CE accumulators before she placed her last order for the day. If there had been no conversations between Ng and Teo at all on 2 October 2007 or if the conversations between Ng and Teo on 2 October 2007 had occurred only after Ng had placed orders for the Third, Fourth, Fifth and Sixth CE Accumulators, then CIC’s submission that Ng had bought CE accumulators pursuant to Teo’s instructions given to her on 2 October 2007 must immediately fail. For this purpose, the Table of Events of 2 October 2007 may be simplified in the following manner:
Simplified Table of Events of 2 October 2007
From the above, it can readily be seen that there was an opportunity for Client A (if he had ordered the purchase of 6,500 CE accumulator shares per day at 8:29 am) and Client B (if he had ordered the purchase of 6,000 CE accumulator shares per day at 8:33 am) to give Ng instructions to purchase a total of 12,500 CE accumulator shares per day before Ng placed the combined order of 12,500 CE accumulator shares per day with PBA in three tranches, which resulted in the Fifth CE Accumulator (5,000 CE shares per day ordered at 9:01 am and established at 9:14 am), the Fourth CE Accumulator (5,000 CE shares per day ordered at 9:18 am and established at 9:22 am) and the Third CE Accumulator (2,500 CE shares per day ordered at 9:22 am and established at 9:36 am). Additionally, there was an opportunity for Teo (if he had ordered the purchase of 7,500 CE accumulator shares per day at 9:34 am) and Client C (if he had ordered the purchase of 3,500 CE accumulator shares per day at 9:54 am) to give their instructions to Ng before Ng placed the combined order of 11,000 CE accumulator shares per day in two tranches with PBA, which resulted in the Sixth CE Accumulator (ordered at 10:32 am and established at 11:39 am for the first tranche, and ordered at 11:44 am and established at 11:56 am for the second tranche making a total of 11,000 CE shares per day). The evidence supports CIC’s position that Ng after taking all the clients’ orders does not necessarily place out the orders with PBA in one tranche. Depending on the circumstances and the price movements, she might choose to combine her clients’ orders and then place them out with PBA in two or more tranches at different times of the day.
[47] I have to stress at this juncture that it is not inconceivable for Client A, Client B and Client C to place orders with Ng by giving her an indicative range of the approximate size of their orders or the maximum size of their orders, rather than by stating that their orders have to be exactly a certain quantity of accumulator shares per day because there is no certainty that orders placed by CIC with its counterparties will always be fulfilled to the full extent. In other words, a client may place an order for between 10,000 and 13,000 CE accumulator shares per day, but the actual order fulfilled may be 11,000 CE accumulator shares per day, or it may even be less, say, 9,000 CE accumulator shares per day. Basically, there is no guarantee that all the orders initially requested by Ng’s clients would be fulfilled. It follows therefore that the exact size of the orders fulfilled and subsequently attributed to a particular client cannot be used as a conclusive indication that the orders originally placed with Ng by that client must necessarily be of that size. For instance, if the actual order fulfilled for Client C was 3,500 CE accumulator shares per day, it does not necessarily mean that Client C had in fact originally ordered exactly 3,500 CE accumulator shares per day (in the absence of other evidence), as Client C could well have ordered a maximum of 5,000 CE accumulator shares per day or ordered between 3,000 and 5,000 CE accumulator shares per day, but the order was only fulfilled to the extent of 3,500 CE accumulator shares per day, leaving the balance unfulfilled. This however does not detract from the usefulness of the above Simplified Table of Events of 2 October 2007, which is principally to determine if there was indeed an opportunity in terms of “timing sequence” for instructions to be first given by the various clients, and thereafter for orders to be placed with PBA, leading either to a complete or partial fulfilment of the orders as the case may be. If it could be shown that there was no phone call or SMS at all between Ng and Teo, prior to the placing of orders by Ng with PBS, whether on the day itself i.e. 2 October 2007 (or even perhaps late in the day before i.e. 1 October 2007, after the close of the Singapore Exchange), then clearly Ng would not have received any instructions from Teo to purchase the CE accumulators on 2 October 2007. The Simplified Table of Events of 2 October 2007 helps to ascertain that position. In this case, it is clear to me that there was an opportunity for Teo to give the instructions that eventually led to 7,500 CE accumulator shares per day being purchased for him.
[48] The peripheral issue, which Teo’s counsel kept highlighting at the trial, is whether it would have been right for Ng to redistribute to Client A, Client B, Client C and Teo the total of 23,500 CE accumulator shares per day purchased at different times on 2 October 2007 at marginally different initial prices between S$1.74 and S$1.8109, and with correspondingly marginally different strike prices between S$1.5834 and S$1.6335, and with marginally different knock-out prices from S$1.7922 and S$1.8489 according to the Table of Allocation, whilst keeping the actual total orders from each of the clients the same. For instance, should Ng have distributed only the Fifth, Fourth and Third CE Accumulators (totalling 12,500 CE shares per day) to Client A (getting 6,500 CE shares per day) and Client B (getting 6,000 CE shares per day), and only the Sixth CE Accumulator (totalling 11,000 CE shares per day) to Teo (getting 7,500 CE shares per day) and Client C (getting 3,500 CE shares per day); as opposed to distributing such that Client A, Client B and Teo were given a combination of the Fifth, Fourth, Third and Sixth CE Accumulators but still receiving the total number of accumulators within the parameters of the orders they had originally placed with her on 2 October 2007.
[49] Since the defence of Teo was that he never gave any instructions at all to purchase even a single CE accumulator share on the 2 October 2007, I do not think that the method of allocation used by Ng (see Table of Allocation), which may be thought to be less fair than if the “time sequence” factor had been taken into account, is going to help Teo to show that he could never have placed any order for CE accumulator shares and that he never did place any order that resulted in 7,500 CE accumulator shares per day purchased for him on 2 October 2007 -- whether or not it should have been 7,500 CE accumulator shares per day all coming from the Sixth Accumulator, or the same total of 7,500 CE accumulator shares per day coming from a combination of the Fifth, Fourth, Third and Sixth Accumulators, which have only marginally different strike and knock-out prices.
[50] Having established that the 9:34 am call on 2 October 2007 had presented an opportunity for Teo to give Ng instructions to purchase CE accumulators on that day for him, the next question is what was actually said during this call. To discern what was likely to have been said, I now examine the events before and after the call. It can be seen from the Table of Events of 2 October 2007 that it was Teo who initiated contact with Ng on 2 October. Although there is no record of the content of his SMS sent at 7:47 am, there is a record of Ng’s reply just two minutes later at 7:49 am. She was indeed very quick with her SMS response to Teo on that day. I wondered why it was so urgent for Teo to send an SMS early in the morning to Ng. It certainly could not be for social matters or mere market updates or discussions. More likely than not, it was for business transactions that need to be carried out which are time sensitive. CIC argued that it is apparent from Ng’s reply that Ng was responding to Teo’s query on, inter alia, the status of the US market and this meant that Teo was considering entering into more accumulator transactions. Ng updated Teo that the US market had performed very well the night before and opined that the rally in the US market should continue when she sent an SMS to Teo with the following message: “Ok, last night us very good. Rally shld continue.” It is very significant to note that Ng, in this SMS, wanted to know whether she could purchase more accumulators for Teo and she had in fact specifically asked Teo “Can I do somemore?” i.e. purchase more accumulators for him. Ng also suggested that Teo consider China Energy, Cosco and Ferrochina accumulators when she ended her SMS by saying, “Looking at china energy, cosco, ferrochina.” Ng’s SMS reply, sent at 7:49 am, was however only received by Teo at 9:34 am after Teo disembarked an airplane in Penang and switched on his phone. I am inclined to believe that when Teo saw Ng’s SMS asking him whether she could purchase more accumulators for him, Teo wasted no time in responding and he immediately called Ng (approximately 6 seconds later), apparently rather urgently at 9:34:06 am. This 9:34:06 am call from Teo to Ng lasted 2 minutes and 22 seconds. During cross-examination, much time was spent trying to establish whether Teo had first read Ng’s SMS and then called her or whether he had first called Ng and then read her SMS. Teo said that he could not remember. Whatever the order might have been, given that Ng’s question in her SMS (“Can I do somemore?”) had not been answered, it was very likely that she would have asked Teo again during the telephone conversation whether he wanted to buy more accumulators. Indeed, Teo admitted that it was more likely than not that she asked him if he wanted to buy more CE accumulators. CIC’s case is that it was during this call that Teo authorised the purchase of CE accumulators on his behalf. Ng’s testimony at the first trial was that Teo authorised her to purchase the CE accumulators on his behalf during this call. Teo, on the other hand, gave evidence that during this call, Ng told him that the Second CE Accumulator (i.e. item number 14 in the Table of Accumulators) and the second Cosco accumulator (i.e. item number 13 in the Table of Accumulators) which he had previously established had been knocked out, and Teo instructed Ng to sell his Cosco shares but keep his CE shares. He was adamant that if Ng had asked him whether he wanted to buy more CE accumulators, he would have said no.
[51] Teo gave several reasons to support his argument that he could not have authorised Ng to purchase CE accumulators during the 9:34 am call. For the purpose of analysis, the following three stages will be considered: the instructing stage, the ordering stage and the allocating stage.
[52] With respect to the instructing stage, it was argued that Ng could not have accepted Teo’s alleged instructions to purchase CE accumulators during the 9:34 am call because Ng was informed before the call that her order for 5,000 CE accumulator shares per day placed at 9:22 am, presumably for Client A and Client B (at entry number 8 of the Table of Events of 2 October 2007), could not be fully filled and that DBS Bank did not want to establish anymore CE accumulators. This argument is misconceived. It was open to Ng in those circumstances to accept instructions from Teo to establish CE accumulators because upon receiving Teo’s mandate, Ng would have the power but not the obligation to establish accumulators on Teo’s behalf. In any case, there were other counterparties apart from DBS Bank which CIC could, and in this case did, deal with, such as Goldman Sachs.
[53] For the ordering stage, it was argued that Teo could not have given instructions to purchase CE accumulators of up to S$6 million during the 9:34 am call because after this call, Ng had five further telephone conversations with Lillian but did not place any orders for CE accumulators. It was only at 10:32 am that Ng finally placed an order for CE accumulators, and this was not an order for S$6 million worth of accumulators, but for US$1 million worth of accumulators. These arguments fail to take into account the discretion which must necessarily be given to relationship managers. Save when there are contrary instructions and as long as they act within the terms of their mandate, relationship managers may decide how to combine the orders from various clients, the number of tranches to split up each order into, the size of each tranche and the time that they should place each tranche with PBA depending on the prevailing market conditions and other factors which would ordinarily be taken into account when making investment decisions. Thus, for example, even if immediately after the 9:34 am call, Ng was able to establish S$6 million worth of accumulators within the range of the initial, knock-out and strike prices allegedly instructed by Teo, I do not think that she had no discretion to wait if for some reason she thought it better to do so, such as if she thought that she might be able to get a better deal later in the day. In any case, it is not Teo’s allegation that Ng had delayed the placing of orders for an unacceptable amount of time or for unacceptable reasons.
[54] Teo further argued that Ng placed orders for him before he had an opportunity to instruct her to do so, as Ng had placed orders for the Third to Fifth CE Accumulators before his 9:34 am call to Ng. However, the Simplified Table of Events of 2 October 2007 and the Table of Allocation will show that Ng did not place an order for Teo before speaking with him: Ng had secured 12,500 CE accumulator shares per day in three tranches under the Third to Fifth CE Accumulators for orders which she made after speaking with Client A and Client B but before speaking with Teo, and correspondingly, Ng had allocated the same number of 12,500 CE accumulator shares per day under the Third to Sixth CE Accumulators to Client A and Client B. Similarly, after speaking with Teo and Client C, Ng secured orders of 11,000 CE accumulator shares per day in two tranches under the Sixth CE Accumulator, and correspondingly allocated the same number of 11,000 CE accumulator shares per day to Teo and Client C under the Third to Sixth CE Accumulators. The Table of Allocation clarifies how Ng made the allocations.
[55] In relation to the allocation stage, it was argued that since Ng stated that she would only enter into a transaction after she had received her clients’ instructions, the Third to Fifth CE Accumulators ordered by Ng before she spoke with Teo must have been ordered for Client A and/or Client B and not Teo; yet, shares to be delivered under the Third to Fifth CE Accumulators were allocated to Teo. In response, CIC submitted that Ng only consolidated and allocated her confirmed transactions at the end of each day to each of her clients, thereby explaining why shares to be delivered under the Third to Fifth CE Accumulators were allocated to Teo. I find that even if Teo’s argument is correct, it does not lend much weight to Teo’s case that he had not authorised the purchase of any CE accumulators; all that can be said is that Teo should only have been allocated shares under the Sixth CE Accumulator, instead of shares under the Third to Sixth CE Accumulators. However, this is not the position that he has taken in this case and therefore I need not examine the propriety or otherwise of what CIC said was Ng’s consolidation and allocation process.
[56] I will however make this observation. On the facts before me, CIC is not buying the accumulators on behalf of Client A, Client B, Client C and Teo as their agent. If that were the case, then perhaps it is arguable that CIC should not be consolidating and thereafter, re-allocating and re-distributing the CE accumulators bought on that day for each of them. Instead, CIC arguably should have approached PBA to place separate and discrete orders for each client without combining any of their orders, when making purchases on their behalf. However, CIC’s counterparties such as DBS Bank and Goldman Sachs may not be too interested in dealing with small orders and if they do, they may not quote good prices for the small orders. Where orders from individual clients are small, relationship managers may choose to consolidate their clients’ orders into larger orders before placing them with PBA and perhaps better prices could be obtained on account of bulk orders, which if secured can later be sub-divided and distributed to their clients, whilst keeping the quantities allocated to each client the same as or within what each client has originally ordered. Hence, assuming that CIC was acting only as an agent for Teo and assuming that Teo had placed an order with Ng for 7,500 CE accumulator shares per day on 2 October 2007 at 9:34 am, and if the argument is that Ng should have instructed PBA to approach DBS Bank or Goldman Sachs to specifically secure an order for the same exact amount of 7,500 CE accumulator shares per day soon after obtaining Teo’s instructions at 9:34 am (instead of delaying it to 10:32 am and 11:44 am), I think it would then be likely that the 7,500 CE accumulator shares secured for Teo on that day would be at the initial price of about S$1.795, a strike price of S$1.6335 and a knock-out price of S$1.8489 (based on the parameters governing the third CE Accumulator, which was established at about 9:36 am on that same day). One has to bear in mind that the share price may fluctuate throughout the day. It would appear that the price of CE shares on the Singapore Exchange started at a high of about S$1.81 at about 9:00 am when the market opened on 2 October 2007, and then stayed fairly stable for the next 40 minutes or so at about S$1.795, before gradually slipping downwards by 4½ cents to S$1.74 by about 11:40 am and 11:56 am as can be seen from the initial prices for CE shares set out in the Table of Accumulators and the times at which the corresponding CE accumulators were established as set out in the Simplified Table of Events of 2 October 2007. It is obvious to me that Ng was delaying placing out the orders with PBA so that she could get better initial prices and therefore correspondingly lower strike prices for accumulation, when she noticed a slight weakening in the price of CE shares as the morning progressed. Ng was obviously trying to do her best for all her clients. She was proved right in that her later orders on that day, which she had delayed placing, were secured by her at much better prices i.e. a lower initial price of S$1.74, a lower strike price of S$1.5843 and a lower knock-out price of S$1.7922 (as can be seen from the details at item 18 in the Table of Accumulators for the Sixth CE Accumulator, which were placed out much later in two tranches at about 10:32 am and near noon time at about 11:44 am, and which were eventually secured at about 11:39 am and 11:56 am respectively).
[57] I calculated that the maximum total obligation (which is to include the doubling effect when the spot price falls below the strike price) for a year’s accumulation (based on approximately 252 trading days in a year) at the rate of 7,500 CE accumulator shares per day multiplied by two, and at the strike price of S$1.6335 that would likely be applicable at 9:36 am on 2 October 2007 would have been S$6,174,630 (i.e. See item 15 of the Table of Accumulators for the Third CE Accumulator established at 9:36 am on 2 October 2007, which has a total obligation of $823,284 when the accumulation obligation is at the rate of 1,000 CE accumulator shares per day. Multiplying that by 7.5 will give the maximum total obligation of S$6,174,630 for a CE accumulator that requires accumulation at 7,500 CE accumulator shares per day). Compare that with the maximum total obligation of the 7,500 CE accumulator shares per day that were actually distributed to Teo, which comes to a slightly lower figure of S$6,046,178 (i.e. Add up the total obligations for the 7,500 CE accumulator shares per day from item 15 to item 18 in the Table of Accumulators as follows: S$823,284 + S$1,614,514 + S$1,629,130 + S$1,979,250 = S$6,046,178). If CIC had strictly acted as an agent and promptly bought an exact amount of 7,500 CE accumulator shares per day at about 9:34 am specifically for Teo without co-mingling Teo’s order with the orders of Ng’s other clients, Teo would have been worse off by some S$128,452 being the difference between S$6,174,630 and S$6,046,178 (i.e. Teo would have been slightly worse off by about 2% in so far as his maximum obligation is concerned for this order.) I therefore cannot see any reason for Teo to complain when Ng watches the market and the price movements of the CE shares and when she delays placing out the orders upon noticing an intra-day weakening in the CE share price with a view to securing a better deal for all her clients, and when she combines the orders and later re-allocates them in a manner she thinks would be fair to all her clients. In this case, Teo came out better off than if Ng had immediately placed out Teo’s order with PBA and secured the order immediately for him at about 9:36 am. In any case, it is my view that CIC is entitled to consolidate their clients’ orders for the day before purchasing the corresponding amounts in various tranches from its counterparties, namely DBS Bank or Goldman Sachs; and after securing the orders in bulk on that day for itself, CIC is entitled to re-distribute them to their various clients to fulfil individual orders. The principal reason is that CIC is not acting as an agent separately for each client. CIC is in fact acting as a principal party selling smaller, repackaged accumulators separately to Client A, Client B, Client C and Teo from the pool of accumulators that CIC has purchased or secured for itself on that day. In this case, CIC even prepares its own accumulator term sheets to evidence the transaction between itself and its clients, although the details may have been extracted from the corresponding accumulator term sheets from DBS Bank or Goldman Sachs that evidence the terms of the accumulator contracts between DBS Bank/Goldman Sachs with CIC.
[58] In other words, after CIC has successfully secured bulk orders from DBS Bank or Goldman Sachs, CIC is not prohibited from subdividing the big pool of accumulators that CIC has purchased for itself for the purpose of acting as a principal seller to sell smaller re-packaged quantities of accumulators from that pool to Ng’s clients, namely Client A, Client B, Client C and Teo. CIC has greater flexibility when it is dealing as a principal (and not strictly as an agent) vis-à-vis its own clients.
[59] Accordingly, there is no merit whatsoever in the argument that just because Teo had been allocated from the pool of CE accumulators (i.e. the Fifth, Fourth and Third) which were purchased by CIC from DBS Bank before Teo called Ng at 9:34 am on 2 October 2007, it must follow that those Accumulators were not authorised by him. The second and final phone call between Teo and Ng on 2 October 2007 was made by Teo to Ng at 5:35 pm. Ng gave evidence that during this call, she informed Teo that she had established the Third to Sixth CE Accumulators. Teo denied this. Although he could not remember what the conversation was about, he stated that he might have called to ask Ng whether she had sold his Cosco shares pursuant to his instructions in the 9:34 am call.Although there is some merit to CIC’s suggestion that this would not have taken over three minutes, I do not think that the case turned on this point.
[60] In summary, during the 9:34 am call on 2 October 2007, Teo had an opportunity to give Ng instructions to purchase CE accumulators (at [46]) and it was likely that there was a discussion on whether to purchase CE accumulators (at [50]). I find that the way in which Ng received instructions to purchase CE accumulators (at [52]), placed orders for CE accumulators (at [53] and [54]), and allocated the CE accumulators established (at [44], [45] and [55]) on 2 October 2007 does not rule out the possibility that Teo had instructed Ng to purchase 7,500 CE accumulator shares per day during the 9:34 am call. In my view, from the totality of the circumstances, in particular the timing and sequence of the events, and the content of Ng’s SMS sent at 7:49 am, it is more likely than not that instructions to purchase CE Accumulators had been given by Teo to Ng on 2 October 2007, which resulted in the purchase of a total of 7,500 CE accumulator shares per day for Teo on that same day.
Events of 3 October 2007
[61] On 3 October 2007, there were various recorded telephone conversations between Ng and Lillian and transcripts of these conversations have been provided. According to Ng’s and Teo’s telephone records, there were also telephone conversations between Ng on the one hand and Teo, Client A and Client B on the other. These calls were not recorded save for one call between Ng and Client A. Ng and Teo gave evidence on what was said during the calls between them. From the evidence, the chronology of events on 3 October 2007 which are material to this dispute is as follows:
Table of Events of 3 October 2007
[62] The allocation of the Seventh CE Accumulator and the Sembcorp Accumulator among Ng’s clients, according to CIC, is as follows:
[63] Again, for CIC’s case to stand, there must have been, at the very least, an opportunity for Client A, Client B and Teo to give Ng instructions to purchase accumulators before Ng placed orders for the Seventh CE Accumulator and the Sembcorp Accumulator. This is the case here, as there were three calls between Ng and Client A from 6:55 pm to 7:54 pmon the evening of the previous day after the close of the market i.e. on 2 October 2007 (see entry numbers 23 to 25 in the Table of Events of 2 October 2007) during which CIC alleged that Client A gave Ng instructions to establish the Seventh CE Accumulator and the Sembcorp Accumulator, a call between Ng and Client B at 10:15 am on 3 October 2007 (see entry number 3 in the Table of Events of 3 October 2007) and a call between Ng and Teo at 10:27 am on 3 October 2007 (see entry number 4 in the Table of Events of 3 October 2007), before Ng proceeded to place consolidated orders with PBA for the Seventh CE Accumulator and the Sembcorp Accumulator at 10:29 am on 3 October 2007 for Client A, Client B and Teo.
[64] Once again, having established that the 10:27 am call presented an opportunity for Teo to give Ng instructions to purchase CE accumulator shares and Sembcorp accumulator shares on his behalf, the next question is what was actually said during this call. To discern what was likely to have been said, I now examine the events before and after the 10:27 am call.
[65] From 9:27 am to 10:09 am on 3 October 2007, there were four calls between Lillian and Ng, where Ng had requested and obtained quotes for Sembcorp and CE accumulators. Ng also told Lillian that she would take orders and then let Lillian know what they were. The fact that Ng had specifically told Lillian that she would take clients’ orders first and then let Lillian know subsequently what they were indicates clearly to me her intention to seek her clients’ instructions first. Her conduct at this point of time does not, on a balance of probabilities, indicate to me that Ng was a client relationship manager who was going to act on a frolic of her own to place orders willy-nilly, or who was going to use her clients’ accounts to trade for herself or to take positions without the client’s knowledge and consent in order to benefit personally from those positions when the trades turn out in her favour and to foist those positions on her clients when the trades turn out against her. In any event, there is clear evidence from Kwek that it is virtually impossible for Ng to do that, given the various internal controls, notification systems, client accounts and payment systems operated by CIC. Basically, Ng will be found out very quickly if she were to buy accumulators behind the back of her clients so to speak, or if she were to misuse her clients’ accounts and overdraft/credit facilities to take positions on accumulators for her own personal benefit. Second, because the strike price is always set at a discount to the initial price at the time of purchase of an accumulator, one will only know later whether the trade will turn out to be favourable. The spot price basically must fall below the strike price and remain below the strike price for the trade to be unfavourable. By that time, a client, upon receiving independent notification of the trades which were truly not his, would certainly be alarmed and would have reported the whole matter to CIC. Ng would soon be caught for her wrong doing perhaps even before she can profit from those trades. Given the strict controls within CIC, my assessment is that Ng would not likely take on such a huge risk on a balance of probabilities.
[66] From the Table of Events of 3 October 2007, it can be seen that four minutes after Ng obtained quotes for the Sembcorp and CE accumulators and told Lillian from PBA that she would take orders and get back to Lillian, Ng made an unsuccessful attempt at 10:13:56 am to reach Teo.
[67] Ng then talked to Client B and thereafter, she managed to speak to Teo at 10:27 am. It is very significant to note that less than a minute after finishing her 10:27 am call to Teo, Ng placed with Lillian orders for the Seventh CE Accumulator and the Sembcorp Accumulator. CIC’s case is that it was during this 10:27 am call that Teo instructed Ng to purchase CE and Sembcorp accumulators. CIC further alleged that Ng called Teo at 11:00 am to inform him that those accumulators had been established. Teo, on the other hand, stated that the 10:27 am call was about whether to sell the shares in his account, including the CE and NOL shares. When asked to explain why there was a need for Ng to call him again only about thirty minutes later at 11:00 am, he stated that he could not remember but she could have been reporting the share prices to him and again discussing with him whether to sell his CE and NOL shares. The lack of a satisfactory explanation from Teo for the second call from Ng at 11:00 am and the close proximity between the calls where Ng first obtained quotes from Lillian for the CE and Sembcorp accumulators and the subsequent calls where Ng talked to Client B and Teo, followed immediately by the call where Ng placed orders with Lillian, suggest strongly to me that Teo must have instructed Ng during the 10:27 am call to purchase the CE and Sembcorp accumulators. Both the proximity of timing and sequence of calls are highly probative to show that Ng had sought and obtained instructions from Teo before she proceeded to order the CE and Sembcorp accumulators for Teo.
[68] It was accepted by both parties that when Lillian conveyed Ng’s order for CE accumulators to Vera (see entry number 6 in the Table of Events of 3 October 2007), a mistake was made such that instead of an order being placed for S$86,500 worth of CE shares per week, an order was placed for 86,500 CE shares per week, resulting in an over-order of about 33,500 shares per week. Teo alleged that Ng allocated the excess shares to Teo without Teo’s consent to cover up Lillian’s mistake. When cross-examined at the first trial, Ng gave evidence that she had realised Lillian’s error but did not correct it because apart from the order that she had placed with Lillian, she had other orders to fill, and 86,500 CE shares per week fell within the range of shares that she had been instructed to order for all of her clients. Ng’s evidence is supported by the contemporaneous note written by Ng on 3 October 2007 setting out how shares to be delivered under the Seventh CE Accumulator were to be allocated amongst her three clients. When asked why she did not place all her clients’ orders together when she spoke to Lillian, Ng explained that depending on the market, she may place a full order or orders in tranches. I note that this is consistent with how Ng placed her orders in tranches on 2 October 2007 and I accept Ng’s evidence that this was her practice. I also accept her explanation for not correcting Lillian’s error because it is unlikely that Ng would risk civil and criminal liability just to cover up her colleague’s error, when her evidence during re-examination at the first trial was that she knew of an easier and more sensible way of rectifying the mistake:
[70] Teo also alleged that there was a further mistake on 3 October 2007, this time made by Ng when she placed orders with PBA using figures which took into account the potential doubling effect, whereas PBA placed orders with its counterparties using figures which did not take into account the doubling effect. Teo argued that this resulted in Ng placing twice as many orders than she had been instructed to, and that Ng had then dumped the excess on Teo. CIC, on the other hand, responded that there was no mistake because the established practice between Ng and PBA was that the figures Ng gave to PBA would not take into account the doubling effect, and it was also industry practice not to include the doubling effect when banks placed orders with their counterparties. I accept CIC’s evidence on its internal practices and on the practices of the industry it is in, since it is CIC and not Teo who would know best about these industry practices. In any event as between CIC and Teo, it would appear from the previous undisputed accumulator transactions that the manner in which (a) instructions and orders were given to Ng; and (b) the fulfilled orders from DBS and Goldman Sachs were in turn later sold by CIC acting as principal to Teo as the buyer, shows that the accumulator transactions between CIC and Teo were done on the same basis as the industry practice as described by CIC. I therefore reject the argument of Teo that Ng had placed twice as many orders as she had been instructed to because of the doubling effect.
[71] In summary, the sequence of events on 3 October 2007 leads me to believe that Teo had in fact instructed Ng to establish the Seventh CE Accumulator and the Sembcorp Accumulator (from [63] to [68][67]). I find on a balance of probabilities that Ng had not dumped shares on Teo in order to cover up a mistake, whether committed by PBA (at -[69]) or allegedly by Ng (at [70]).
Events after 3 October 2007
[72] The events after 3 October 2007 further point towards Teo having instructed Ng to purchase the Third to Sixth CE Accumulators on 2 October 2007 and the Seventh CE Accumulator on 3 October 2007.
(1) Teo’s inaction for more than a month after 3 October 2007
[73] It is not disputed that after 3 October 2007, there were no further conversations between Teo and Ng until 11 October 2007. Ng gave evidence that this was because the Disputed Accumulators and the Sembcorp Accumulator were still running and both Ng and Teo were waiting for the stock market to improve. Teo did not have any satisfactory explanation for the gap in communication between him and Ng during this period. He alleged that it was only during a telephone conversation with Ng on 16 October 2007 that he discovered that Ng had entered into the Disputed Accumulators and the Sembcorp Accumulator on his behalf. Yet, he did not raise any issue or complaint to CIC’s management until more than a month later on 20 November 2007. To explain the delay, Teo claimed that he had on 18 October 2007 acceded to Ng’s request for a month to resolve the issue of the Disputed Accumulators with her superiors. CIC’s position is that this story is made up by Teo.

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Crédit Industriel et Commercial v Teo Wai Cheong

Laws this judgment relies on

Grounds of decision

Introduction

Background

Parties

Facts

Overarching contracts between CIC and Teo

(1) Account Opening and Custodian Agreement

(2) Banking Facility Letter and Charge Agreement

Accumulators purchased under Teo’s account

Table of Accumulators

Plaintiff’s case

Defendant’s case

History of the case

The re-trial

Ng’s evidence

Issues

My decision

Whether Teo instructed Ng to purchase the Disputed Accumulators on his behalf

Events of 2 October 2007

Table of Events of 2 October 2007

Table of Allocation

Simplified Table of Events of 2 October 2007

Events of 3 October 2007

Table of Events of 3 October 2007

Events after 3 October 2007

(1) Teo’s inaction for more than a month after 3 October 2007