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Grounds publishedDecided 25 Jun 2015
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High Court

MF Global Singapore Pte Ltd (in creditors’ voluntary liquidation) and others v Vintage Bullion DMCC (in its own capacity and as representative of the customers of the first plaintiff) and another matter

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[2015] SGHC 162Case no. Originating Summons No 289 and 578 of 2013

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  1. Hoo Sheau Peng JC:

  2. Introduction

  3. [1] The two applications before me are brought under s 310 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) for the court to determine questions arising out of the winding up of MF Global Singapore Pte Ltd (“MFGS”). Originating Summons No 289 of 2013 (“OS 289”) was commenced by MFGS and the joint and several liquidators, Mr Chay Fook Yuen, Mr Bob Yap Cheng Ghee (“Mr Yap”) and Mr Tay Puay Cheng (collectively, “the Liquidators”), against Vintage Bullion DMCC (“Vintage”) in its own capacity and as representative of 57 other customers of MFGS (collectively, “the LFX and Bullion customers”). As Vintage disagreed with the Liquidators’ framing of the issues in OS 289, Vintage lodged Originating Summons No 578 of 2013 (“OS 578”) in its own capacity against MFGS.

  4. [2] Essentially, the central issues in both OS 289 and OS 578 are the same, and concern the treatment of certain forms of profits made by the LFX and Bullion customers under leveraged foreign exchange (“LFX transactions”) and leveraged commodity transactions (“Bullion transactions”) conducted by MFGS. In relation to these forms of profits, Vintage asserts proprietary claims, while MFGS argues that Vintage only has unsecured claims. In the latter scenario, the LFX and Bullion customers would stand as unsecured creditors, and would have to prove these unsecured debts in MFGS’ winding up. Parties thus agreed for both applications to be heard at the same time.

  5. [3] While Vintage was appointed, pursuant to an order of court dated 16 July 2013 in OS 289, to represent the LFX and Bullion customers who have claims for these forms of profits arising out of LFX and Bullion transactions, the order provided that Vintage was “not required to keep any [of the other customers] informed of these proceedings or to advance an argument or to take any instructions from any of them”. For the avoidance of doubt, any decision made in respect of Vintage in this judgment will apply equally to the LFX and Bullion customers who have equivalent claims against MFGS.

  6. Facts

  7. MFGS and its model of business

  8. [4] I now set out the facts (with key terms highlighted in bold italics). MFGS was, at all material times, a member and clearing member of the Singapore Exchange Securities Trading Limited, the Singapore Exchange Derivatives Trading Limited, and the Singapore Exchange Derivatives Clearing Limited. MFGS was also a holder of a Capital Markets Services licence (“CMS licence”), issued by the Monetary Authority of Singapore (“MAS”), authorised to carry out the following regulated activities under the Securities and Futures Act (Cap 289, 2006 Rev Ed) (“SFA”):

  9. (a) dealing in securities;

  10. (b) trading in futures contracts;

  11. (c) leveraged foreign exchange trading;

  12. (d) securities financing; and

  13. (e) providing custodial services for securities.

  14. [5] In the ordinary course of business, MFGS offered a range of over-the-counter LFX and Bullion products which included:

  15. (a) cash-settled over-the-counter LFX spot contracts;

  16. (b) cash-settled over-the-counter LFX forward contracts;

  17. (c) cash-settled over-the-counter LFX non-deliverable forward contracts;

  18. (d) over-the-counter LFX option contracts; and

  19. (e) cash-settled over-the-counter Bullion spot contracts.

  20. [6] The above over-the-counter products were not traded on any exchange, and involved transactions where the investor would buy or sell currencies or commodities in a bid to profit from fluctuations in exchange rates between two different currencies, or fluctuations in the prices of commodities without physical delivery of the currencies or commodities involved.

  21. [7] For the purpose of facilitating trades in LFX or Bullion transactions, customers were required to open and maintain accounts with MFGS. The relationships between the LFX and Bullion customers and MFGS and the trades were governed by the terms and conditions set out in the account opening form and the Master Trading Agreement (“MTA”), which also enclosed a risk disclosure statement (“the Risk Disclosure Statement”).

  22. [8] Once the accounts were opened, customers would typically place with MFGS funds necessary to enable trades to be executed and to maintain open positions on the trades by way of “margin”. The bulk of MFGS’ customers traded on margin (ie, trading by placing a certain percentage of the value of the position concerned with MFGS). The margin required varied depending on the requirements for trading in the product concerned.

  23. [9] MFGS operated a 24-hour dealing and service desk for customers who traded in LFX and Bullion products. Customers could either trade directly with MFGS by calling MFGS’ desk dealers or by utilising an online platform. An order could be placed with MFGS via either platform so long as a customer had sufficient margin to enter into the transaction. If the customer did not meet MFGS’ margin requirements, MFGS would require the customer to satisfy the margin requirements before entering into an LFX or Bullion transaction.

  24. [10] In respect of the LFX and Bullion transactions, MFGS did not act as its customers’ agent. Instead, a customer concluded an LFX or Bullion transaction directly with MFGS which acted as principal on its own behalf. In other words, MFGS was the direct counterparty to any LFX or Bullion transaction which a customer entered into.

  25. [11] To hedge its own exposure, MFGS engaged in hedge transactions with hedge counterparties, being the Union Bank of Switzerland (“UBS”) in respect of the LFX transactions, and Deutsche Bank (“DB”) in respect of the Bullion transactions. MFGS funded these transactions with its own funds.

  26. [12] The margins placed by customers were deposited into MFGS’ bank accounts which MFGS classified as “Customer Segregated Accounts”. The funds placed in these accounts were segregated from MFGS’ own funds, although MFGS maintained some of its own funds in these accounts. According to the Liquidators, the LFX and Bullion customers’ margins were not onward-placed with any other party, or otherwise utilised by MFGS for the purposes of MFGS’ hedge transactions. Although MFGS maintained a number of Customer Segregated Accounts, MFGS did not open a separate bank account for each customer. MFGS, however, accounted distinctly for each customer’s funds in the Customer Segregated Accounts.

  27. The LFX and Bullion transactions, the “Daily FX Activity Statements” and the “Seg Fund Statements”

  28. [13] MFGS employed a back-office operations system to record the daily LFX and Bullion trade activity for each customer. Daily statements of the accounts of the customers (“Daily FX Activity Statements”) were also produced by the system. As a day-to-day chronicle of the relationship between MFGS and a particular customer, the relevant Daily FX Activity Statements are crucial pieces of documentary evidence presented by the parties.

  29. [14] Basically, a Daily FX Activity Statement contained, inter alia, the following sections: (i) the “Trade Confirmation” section; (ii) the “Forward Liquidation” section; (iii) the “Open Positions” section; and (iv) the “Financial Statement” section. In the ordinary course of business, an LFX or Bullion transaction between MFGS and its customer would occur as described below, and would be recorded in the Daily FX Activity Statements as follows:

  30. (a) The customer would initiate a position by entering into an initial trade. MFGS would issue a trade confirmation under the “Trade Confirmation” section to its customer in the Daily FX Activity Statement for that particular day.

  31. (b) The transaction was thereafter treated as continuing to remain open until a final trade was entered into. In such a case, the customer would be said to have an “open position”. These open positions would be reflected under the “Open Positions” section of the Daily FX Activity Statement.

  32. (c) While a position remained open, the “paper” (ie, notional) value of the open position would be determined with reference to the market price of either the underlying currency or reference bullion (“the daily settlement prices”) in respect of the LFX and Bullion transactions respectively (ie, the transactions were marked to the market). If the movement of the underlying currency or reference bullion favoured the customer, the customer would have unrealised profits. However, if it did not, the customer would incur unrealised losses. The “Unrealised Profits” or “Unrealised Losses” would be reflected in the “Financial Statement” section of the Daily FX Activity Statement.

  33. (d) If a customer was not able to meet MFGS’ margin requirements, MFGS was entitled, by cl E4 of the MTA, to issue a “margin call”, ie, to require a customer to deposit with MFGS additional margins in order for the position to be maintained. I will discuss the way MFGS calculated a customer’s margin requirements at item (j) below.

  34. (e) While the position remained open, the cost of keeping the position open was debited from or credited to the customer based on the total value of the contract. In respect of the LFX transactions, this cost was known as “forex swap”, and in respect of the Bullion transactions, this was termed “spot interest”.

  35. (f) When a final trade was entered into, this was known as “closing” the position. When the position was closed, MFGS would issue a trade confirmation under the “Trade Confirmation” section. The trade confirmation would state the price of the trade, as well as a “Value Date”, which is defined in the MTA as “the date on which the respective obligations of the parties to a foreign exchange or [over-the-counter] transaction are to be performed”. Generally, though not always, the Value Date would be two days after closing a position. The closure of the position at a profit to the customer also gave rise to a sum which would be reflected in the “Financial Statement” section as “Forward Value”. The specific transactions which had been closed out would also be reflected under the “Forward Liquidation” section.

  36. (g) On the Value Date, the sum previously reflected under Forward Value (with that particular Value Date) would be credited to a customer’s running account with MFGS as “Liquidation Profit” and be added to the sum reflected under “Ledger Balance C/F” (where C/F stands for “carried forward”) under the “Financial Statement” section of that day’s Daily FX Activity Statement. In other words, Forward Value with a Value Date “Z” would be shown to have been credited to the Ledger Balance C/F in the Daily FX Activity Statement dated “Z”.

  37. (h) The aggregate sum of the Unrealised Profits, Forward Value and Ledger Balance C/F would be reflected in the “Financial Statement” section as “Total Account Equity”.

  38. (i) When customers wished to withdraw their realised profits represented under the Ledger Balance C/F, MFGS would then effect physical payment to the customers from the Customer Segregated Accounts.

  39. (j) A separate portion of the “Financial Statement” section deals with a customer’s margin requirements. This portion sets out the “Initial Margin Requirement” and “Margin Excess/Deficiency”. The Initial Margin Requirement represents the funds or value initially required to maintain an open position. The Margin Excess/Deficiency represents the difference between a customer’s Total Account Equity and the Initial Margin Requirement as reflected in the same statement. MFGS would only issue a margin call to its customer when a Margin Deficiency is incurred.

  40. [15] At all material times, MFGS ensured that there were sufficient moneys parked in the Customer Segregated Accounts to cover the Total Account Equity of all the LFX and Bullion customers, which inter alia, included the three forms of profits: Unrealised Profits, Forward Value and Ledger Balance C/F. The primary dispute between the Liquidators and Vintage is whether the sums representing the Unrealised Profits and Forward Value in the Customer Segregated Accounts belong beneficially to (and therefore are the property of) the LFX and Bullion customers, or whether they are instead MFGS’ own moneys, available for distribution to MFGS’ unsecured creditors, including the LFX and Bullion customers, on a pari passu basis, in MFGS’ winding up.

  41. [16] During the ordinary course of business, MFGS also submitted a statement of assets and liabilities in the prescribed form under reg 27(1)(a), (3)(a), (9)(b) and (9)(e) of the Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations (Cap 289, Rg 13, 2004 Rev Ed) (“SF(FM)R”) on a quarterly basis to MAS. This form included a document with the heading “Segregation Requirements and Location of Segregated Funds” (“the Seg Fund Statement”). MFGS updated the Seg Fund Statement daily. The Seg Fund Statement is another key piece of documentary evidence referred to by the parties, and I shall describe this in more detail in due course.

  42. Vintage’s relationship with MFGS

  43. [17] On 21 August 2006, Vintage opened an account with MFGS, and engaged in, inter alia, LFX and Bullion transactions through this account. Prior to 1 November 2011, being the date MFGS entered into provisional liquidation, Vintage closed out all its open positions in its LFX and Bullion transactions. In particular, Vintage liquidated 121 lots of silver on 28 October 2011, and a further 241 lots of silver on 31 October 2011. The Value Date for these transactions was 1 November 2011. Vintage also closed out all its LFX transactions on 20 October 2011, and the Forward Value from those transactions had Value Dates of 14 November 2011 and 20 August 2012.

  44. [18] In Vintage’s Daily FX Activity Statement dated 31 October 2011, the numbers (in USD) were reflected under the “Financial Statement” section as follows:

  45. [19] In Vintage’s Daily FX Activity Statement dated 1 November 2011, the numbers (again in USD) were reflected as follows:

  46. The winding up of MFGS and Originating Summons No 22 of 2012

  47. [20] On 31 October 2011, MFGS’ ultimate parent company, MF Global Holdings Ltd, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. Globally, many affiliates of MF Global Holdings Ltd also declared bankruptcy or were placed into administration or liquidation on or around the same date.

  48. [21] In view of the financial condition of MF Global Holdings Ltd at the material time, MAS directed MFGS on 31 October 2011 to, inter alia:

  49. [22] On 1 November 2011, the directors of MFGS passed a resolution to appoint the Liquidators as provisional liquidators of MFGS and MFGS entered into provisional liquidation.

  50. [23] On 10 January 2012, the Liquidators (who were then still provisional liquidators) applied to court by way of Originating Summons No 22 of 2012 (“OS 22”) for an order that they be authorised to distribute on an interim basis up to US$350m to customers identified by the Liquidators as having proprietary interests in certain funds which had then been collected by the Liquidators. The application was granted on 8 February 2012 on the following terms:

  51. [24] It should also be highlighted, for completeness, that the sole shareholder of MFGS, MF Global Overseas Ltd, passed a special resolution on 28 May 2012 for the voluntary winding up of MFGS and appointed the Liquidators as joint and several liquidators of MFGS. A creditors’ meeting was also held on that day where the creditors resolved, amongst other matters, to confirm the appointment of the Liquidators.

  52. The present applications

  53. [25] On 23 April 2012, Vintage received payment of the sum of US$5,137,229.93 as part of the interim distribution made by the Liquidators. This sum included amounts attributable to the LFX and Bullion transactions, as well as amounts from other futures and options transactions. Vintage was of the view that it had been underpaid. It transpired that parties took a different view of how the Unrealised Profits and Forward Value arising from the LFX and Bullion transactions should be treated as a matter of law. OS 289 and OS 578 were thus taken out by the Liquidators and Vintage respectively in order to determine this and other issues. The Unrealised Profits and Forward Value in dispute amount to about US$13.4m for all the LFX and Bullion customers. It should be noted that Vintage is claiming its Forward Value only, a substantial portion of which is attributable to its Bullion transactions. As of 31 October 2011, Vintage did not have any Unrealised Profits.

  54. Summary of the parties’ cases

  55. The Liquidators’ case

  56. [26] According to counsel for the Liquidators, Mr Andre Yeap SC (“Mr Yeap”), given that MFGS acted as principal to the LFX and Bullion customers, the Unrealised Profits constituted only mere uncrystallised contingent debt obligations that were not yet due and payable, and the Forward Value constituted a debt payable only on the future Value Date. Hence, the LFX and Bullion customers only had choses in action against MFGS in respect of the Unrealised Profits and Forward Value. A chose in action could not be converted into trust property which MFGS holds as a “trustee” for a customer. Furthermore, even if it could be said that a “trust” over a chose was possible, it would not have been a trust over actual physical moneys, particularly since such moneys had not been paid, and were in fact not yet due and payable.

  57. [27] As stated above, MFGS maintained sums equivalent to the aggregate of the LFX and Bullion customers’ Unrealised Profits, Forward Value and Ledger Balance C/F in the Customer Segregated Accounts. However, according to the Liquidators, only the Ledger Balance C/F is held on trust for its customers, while the Unrealised Profits and Forward Value formed MFGS’ “residual financial interest” in the Customer Segregated Accounts. On the Value Date of a particular transaction, the Forward Value would be paid by MFGS into a customer’s Ledger Balance C/F from this “residual financial interest”. It was only after this payment on the Value Date that MFGS would hold the amount on trust for the customer. Indeed, the interim distribution under OS 22 was made on this basis.

  58. [28] Specifically, the Liquidators take the view that the statutory trust under the relevant legislation does not capture the Unrealised Profits and Forward Value of the LFX transactions. As for the Bullion transactions, the Liquidators argue that the specific provisions under the relevant legislation apply only when a commodity broker acts as agent for and on behalf of a customer. As MFGS did not act as agent for the Bullion customers, MFGS was not required to segregate any moneys, or hold any moneys on trust. However, the Liquidators’ position is that MFGS voluntarily held a customer’s Ledger Balance C/F attributable to Bullion transactions on trust.

  59. [29] The Liquidators also submit that no express trust was created over the Unrealised Profits and Forward Value. MFGS did not behave in a manner that evinced a clear intention to hold the Unrealised Profits or Forward Value on express trust for the LFX and Bullion customers.

  60. [30] Against Vintage’s argument that the LFX and Bullion customers’ proprietary entitlement to the Ledger Balance C/F should be determined on the basis of the Daily FX Activity Statement dated 1 November 2011, the Liquidators submit that due to the appointment of provisional liquidators on 1 November 2011, MFGS did not and could not pay the Forward Value into MFGS’ Customer Segregated Accounts after the close of business on 31 October 2011. As payments in the ordinary course of MFGS’ business was made at the close of business on a particular Value Date, the last payment MFGS made (and could have made) to the account and credit of customers prior to the appointment of provisional liquidators was at MFGS’ close of business on 31 October 2011, which was 5.00pm New York Time on 31 October 2011 (ie, 5.00am Singapore time on 1 November 2011) before MFGS went into provisional liquidation. Thus, the extent of a customer’s proprietary entitlement should be limited to the Ledger Balance C/F reflected in the 31 October 2011 Daily FX Activity Statement.

  61. Vintage’s case

  62. [31] Vintage’s primary case is that a statutory trust arose over the Unrealised Profits and Forward Value as a result of the relevant legislation applicable to the LFX and Bullion transactions respectively.

  63. [32] Alternatively, even if MFGS was not obliged by the relevant legislation to hold the Unrealised Profits and Forward Value on trust for Vintage and the other LFX and Bullion customers, in actual fact, MFGS segregated moneys covering the value of the Unrealised Profits and Forward Value, and held these moneys on trust. Accordingly, a trust by conduct arose.

  64. [33] Further, Vintage’s argument is that even if MFGS was only required to hold the Ledger Balance C/F on trust for the LFX and Bullion customers, then these customers have a proprietary interest in the Ledger Balance C/F as reflected in the Daily FX Activity Statement dated 1 November 2011, and not of that dated 31 October 2011. Effectively, this means a difference of about US$6m in Vintage’s favour. Vintage’s last argument is that the LFX and Bullion customers are entitled to amounts reflected as Margin Excess in the Daily FX Activity Statement.

  65. [34] On the last day of the hearing before me, Mr Thio Shen Yi SC (“Mr Thio”), counsel for Vintage, also submitted that a number of Mr Yap’s affidavits, as well as an LFX and Bullion Report prepared by the Liquidators for OS 298 and OS 578 (“the LFX and Bullion Report”) contained matters that were inadmissible for being in breach of O 41 r 5(1) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“Rules of Court”).

  66. Issues

  67. [35] Given the positions of the parties, there are a number of substantive issues to be considered. First, I discuss the nature of the Unrealised Profits, Forward Value and Ledger Balance C/F under the contract between MFGS and the LFX and Bullion customers (sans the interposition of any statutory trust or express declaration of trust) (“the Preliminary Issue”).

  68. [36] Next, I will consider whether, in respect of the Unrealised Profits and Forward Value, the LFX and Bullion customers have proprietary claims by way of either a statutory or express trust, or whether they must prove their unsecured debts in the winding up of MFGS (“the Proprietary Claim issue”). To determine the Proprietary Claim issue, the following sub-issues arise:

  69. (a) Given the nature of the Unrealised Profits and Forward Value, whether MFGS is capable of holding them on trust for the benefit of the LFX and Bullion customers.

  70. (b) If so, whether a statutory trust arises over the Unrealised Profits and Forward Value (“the Statutory Trust issue”).

  71. (i) In respect of the Bullion transactions, whether MFGS is obliged under the Commodity Trading Act (Cap 48A, 2009 Rev Ed) (“CTA”) and Commodity Trading Regulations 2001 (Cap 48A, S 578/2001) (“CTR”) to hold the Unrealised Profits and Forward Value on statutory trust for the Bullion customers.

  72. (ii) In respect of the LFX transactions, whether MFGS is obliged under the SFA and Securities and Futures (Licensing and Conduct of Business) Regulations (Cap 289, Rg 10, 2004 Rev Ed) (“SFR”) to hold the Unrealised Profits and Forward Value on statutory trust for the LFX customers.

  73. (c) If no statutory trust arises over the Unrealised Profits and Forward Value, whether an express trust arises over the Unrealised Profits and/or Forward Value as a result of MFGS’ conduct or the way MFGS held or treated such moneys (“the Express Trust issue”).

  74. [37] If the Proprietary Claim issue is answered in the negative, and the LFX and Bullion customers have no proprietary interest in funds representing the Unrealised Profits and Forward Value, then the issue is whether they have a proprietary interest in the Ledger Balance C/F as reflected in the Daily FX Activity Statement dated 1 November 2011, or only in the Ledger Balance C/F reflected in the Daily FX Activity Statement dated 31 October 2011 (“the Value Date issue”).

  75. [38] Lastly, if the LFX and Bullion customers only have a proprietary interest in the Ledger Balance C/F reflected in the 31 October 2011 Daily FX Activity Statement, are they entitled to the amounts reflected as Margin Excess in that statement (“the Margin Excess issue”)?

  76. [39] I should add that the Liquidators, in OS 289 and their submissions, raised two issues which Vintage does not contest before me. These are (i) whether MFGS acted as principal or as agent/broker vis-à-vis the LFX and Bullion customers, and (ii) whether the LFX and Bullion customers have any proprietary entitlement to profits from the hedge transactions which MFGS carried out with UBS and DB. Vintage accepts that the LFX and Bullion transactions which it entered into with MFGS were conducted on a principal-to-principal basis, and that MFGS was not acting as Vintage’s agent. Vintage also does not assert any proprietary entitlement to profits from the hedge transactions MFGS entered into with UBS and DB in respect of the LFX and Bullion transactions respectively. With that, I turn to the Preliminary Issue.

  77. The Preliminary Issue: The nature of the Unrealised Profits, Forward Value and Ledger Balance C/F under the contract between the parties

  78. Parties’ submissions

  79. [40] In their written submissions, the Liquidators refer to the Unrealised Profits and Forward Value as “mere uncrystallised contingent or future debt obligations that were not yet due and payable as at the time of MFGS’ winding up and consequential appointment of provisional liquidators to MFGS”. On its part, Vintage has in the course of oral submissions characterised the Unrealised Profits as “contingent debts” and the Forward Value as “future” or “crystallised” debts owed by MFGS to the LFX and Bullion customers. In my view, it would aid the analysis which follows to first clarify the meaning of these terms and the appropriate legal characterisation of the Unrealised Profits, Forward Value and Ledger Balance C/F under the contract between the parties, without the interposition of the statutory framework under the CTA or SFA, or any declaration of trust on MFGS’ part.

  80. Analysis and findings

  81. [41] I first consider the meaning of “contingent debts”, a term which both the Liquidators and Vintage have used in their submissions. In the context of the winding up of a company, s 253(1)(b) of the Companies Act provides that a “contingent or prospective creditor” may apply to court to wind up a company. Similarly, s 327(1) of the Companies Act, which sets out what debts are provable in the winding up of a company, provides that:

  82. With respect to an insolvent company, the rules relating to debts provable in bankruptcy apply (see s 327(2) of the Companies Act). Under ss 87(1) and (3) of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“Bankruptcy Act”), any liability arising out of a contract to which a bankrupt (i) is subject at the date of the bankruptcy order or (ii) may become subject before his discharge by reason of any obligation incurred before the date of the bankruptcy order shall be provable in bankruptcy. Section 2 of the Bankruptcy Act provides that “liability” means a liability to pay money or money’s worth, irrespective of whether such liability is present or future, certain or contingent or of an amount that is fixed or liquidated or that is capable of being ascertained by fixed rules or as a matter of opinion.

  83. [42] In Kon Yin Tong and another v Leow Boon Cher and others [2011] SGHC 228, Judith Prakash J set out the differences between contingent liability and prospective liability as follows (at [40]):

  84. [43] Therefore, a contingent liability or debt is one that arises out of an existing state of affairs, but is dependent on the happening of a future event which may or may not transpire. On the other hand, a prospective liability may also be understood as a debt payable in the future. In this light, the parties’ respective obligations under the MTA in respect of the LFX and Bullion transactions may be more properly characterised.

  85. [44] The MTA is silent on whether specific property should be held on trust for the customer. Clause A15.1 of the MTA states:

  86. As may be observed, cl A15.1 of the MTA sets out the contractual position in relation to how trust funds and assets are to be treated. However, it does not state what funds or assets are to be held on trust for the customer by MFGS. In other words, there is no contractual definition of what MFGS is obliged to hold on trust for its customers.

  87. [45] In fact, in relation to a customer’s margins, cl A6.8 of the MTA provides that MFGS “shall be entitled to deposit, pledge, re-pledge or lend any funds, assets or property in any form given to MFGS by way of margin”. The clause also provides that MFGS is not required to either account to the customer for “any interest, income or benefit that may be derived from such margin” or return to the customer “identical funds, property or assets … and may return equivalent collateral or margin”. This is to be contrasted with the requirements of the CTA and SFA as to the treatment of margins, which will be discussed later.

  88. [46] In the ordinary course of MFGS’ business, unrealised profits or losses arise when a customer has entered into an open position against MFGS. The terms of the MTA applicable to the LFX and Bullion transactions provide that there will be no physical settlement between MFGS and its customer unless otherwise agreed upon. The relevant provision, cl C1.1 of the MTA, states that:

  89. [47] Hence, in the case of LFX and Bullion transactions, the contract between the parties requires the close-out of open positions (whether voluntarily pursuant to a customer’s instructions, or involuntarily). Until the close-out of the transaction where a customer has entered into an opposite trade, no sums are due and payable (and unless otherwise agreed, no physical settlement is contemplated) either from MFGS to the customer (where the customer makes an unrealised profit) or from the customer to MFGS (where the customer makes an unrealised loss). During this period, the quantum of profit or loss fluctuates on a daily basis as the transaction price for the position is marked to market, and indeed, what may be an unrealised profit on one day, could turn into an unrealised loss on another.

  90. [48] Thus, all that a customer has as against MFGS before he or she enters into an opposite trade, thereby crystallising the profit or loss, is a contingent debt obligation which would be represented by the sum of Unrealised Profits, if at the time the customer is in a position of net gain as against MFGS. In order for this contingent debt to crystallise into an actual liability that MFGS owes to a customer, two events must happen, being (i) the close-out of the transaction and (ii) the movement of the currencies or commodities prices such that the customer is in a position to close-out at a net profit.

  91. [49] Upon close-out of the transaction, a customer’s profit or loss is then quantified. However, under the terms of the MTA, MFGS’ obligation to pay the quantified profit to the customer only arises on the transaction’s Value Date. Under the MTA, the Value Date is defined as “the date on which the respective obligations of the parties to a foreign exchange or [over-the-counter] transaction are to be performed”. In my view, between the close-out of the transaction and the Value Date, what the customer has (in circumstances where the customer is in a position of profit as against MFGS) is a claim against MFGS which has been quantified, but is not yet payable. In other words, this is a prospective liability, and in the framework of s 327 of the Companies Act, the Forward Value may be classified as certain future debt. Hence, while MFGS’ obligation to pay has arisen, it need not be performed until the Value Date.

  92. [50] Finally, upon the Value Date arriving, the quantified profits are due and payable to the customer. The quantified profits are no longer reflected as Forward Value in the Daily FX Activity Statement of that particular Value Date, but are reflected as standing to the client’s account under the Ledger Balance C/F, and are available for withdrawal by the client subject to MFGS’ margin requirements. There is a dispute between the parties as to when on Value Date MFGS performed or should perform this payment – which will be discussed below at the Value Date issue – but this is not material here. In such a situation, I would characterise the Ledger Balance C/F as a certain present debt. A customer could require MFGS to effect immediate payment of the sum representing the Ledger Balance C/F standing to his credit in his account to him. In this regard, the legal position of a customer of MFGS with credit amounts standing to the Ledger Balance C/F would not be unlike the person who deposits money into a bank account.

  93. [51] Professor Alastair Hudson explains it as follows (Alastair Hudson, Equity and Trusts (Routledge, 8th Ed, 2015) (“Equity and Trusts”) at p 1294):

  94. [52] I should clarify though, that an account a customer had with MFGS was not entirely analogous to a bank account. The observations of Sir Andrew Park in Re Global Trader Europe Ltd (in liquidation) [2009] 2 BCLC 18 (“Re Global Trader”) are instructive. In Re Global Trader, Sir Park was also concerned with the legal analysis of transactions conducted by Global Trader and its customers. Like MFGS, Global Trader was a brokerage firm. Global Trader required its customers to open an account with the brokerage, and maintain a sufficient margin sum. It did not act as agent for its customers but was itself the counterparty to the contracts which were primarily contracts for differences and spread bet transactions. In describing the customer’s account with Global Trader, Sir Park stated (at 29–30):

  95. Sir Park then concluded (at 59):

  96. [53] For present purposes, the above analysis is helpful in showing that although the customer’s account with the brokerage is not directly equivalent to a bank account, a customer’s Ledger Balance C/F is MFGS’ acknowledgement of sums which are due and payable to the customer. In the ordinary course absent any statutorily imposed or expressly declared trust, the Ledger Balance C/F therefore represents a chose in action which the customer could enforce by calling on MFGS for payment.

  97. [54] On the nature of a “chose in action”, guidance may also be taken from the Court of Appeal in Lim Lye Hiang v Official Assignee [2012] 1 SLR 228 (at [27]–[28]) where the Court of Appeal explained:

  98. [55] From the preceding analysis, it can be seen that on the terms of the MTA alone, MFGS would have different legal obligations in respect of the Unrealised Profits, Forward Value and Ledger Balance C/F, given that these constitute contingent, certain future and certain present debts respectively. What the customer has in relation to all three forms of profits would be a chose in action against MFGS. It is only when MFGS is obliged, by the terms of the MTA, to effect immediate payment of the quantified profits, that a customer has the right as against MFGS to demand immediate payment of those moneys, and even then, only if MFGS is solvent. In other words, taking reference from the terms of the contract between the customer and MFGS, the contents of each chose – if enforced – are slightly different from the others.

  99. The Proprietary Claim Issue: Whether the LFX and Bullion customers have proprietary rights in the Unrealised Profits and Forward Value

  100. Whether a trust is capable of arising over the Unrealised Profits and Forward Value

  101. [56] With the discussion on the nature of Unrealised Profits and Forward Value in mind, I turn next to consider whether the Unrealised Profits and Forward Value are capable of being the subject-matter of a trust. Mr Yeap strenuously argues that it is not possible for a trust to arise over the Unrealised Profits and Forward Value because the LFX and Bullion customers’ interests in them are merely choses in action. It is not possible for the obligor (here, MFGS) to hold these choses in action on trust for the obligee (the LFX and Bullion customers), as this would contemplate the “obligor-trustee” having to sue itself for the benefit of the “obligee-beneficiary” in the event the obligation was not performed.

  102. [57] Further, Mr Yeap submits that even if this is possible, Vintage still has to conjure up “two magical conversions”, being (i) the conversion of a contingent or future “right to a receivable” into a “trust over the receivable arising from a contractual principal to principal relationship”; and (ii) a further conversion of a trust over such “right to a receivable” into a “trust over actual moneys” in circumstances where such a receivable was not even due and payable, let alone paid to the account and credit of the LFX and Bullion customers.

  103. [58] There is force in the Liquidators’ submissions. As stated above, Vintage’s claims in relation to the Unrealised Profits and Forward Value are properly characterised as choses in action. The right to sue MFGS under these choses vests, at all times, in the LFX and Bullion customers. Although choses in action may be considered “items of property”, they are only property to the extent they may be transferred to third parties. Professor Hudson considers them “quasi-property rights”, analysing them as follows (see Equity and Trusts at p 1298–1299):

  104. [59] Similarly, Dr Joanna Benjamin in Interests in Securities: A Proprietary Law Analysis of the International Securities Markets (Oxford University Press, 2000) at para 13.10 states:

  105. [60] Thus, the LFX and Bullion customers are able to assert only personal (and not proprietary) rights against MFGS in respect of the Unrealised Profits and Forward Value. Indeed, this would also be the position for the Ledger Balance C/F. Additionally, it is not possible for the chose in action to be transferred by the LFX and Bullion customers to MFGS, so as to be held by MFGS as legal owner and trustee for the benefit of another. In effect, this would require MFGS to sue itself in order to enforce the chose. This was illustrated in the case of Simpson and Company v Thomson, Burrell [1877] 3 App Cas 279.

  106. [61] In that case, two ships which collided were owned by the same person. Under the applicable legislation, the ship owner could pay a sum fixed by statute into court to require any one who had a claim against him for damage caused by the ship to prove it against that sum. The ship owner paid the sum into court in respect of one ship. There were competing claims to this sum by the owners of cargo aboard this ship, as well as the ship owner’s underwriters for loss caused by this ship to the ship owner’s other ship. The House of Lords held that as the underwriters had to sue in the name of the person insured (ie, the ship owner) it was not possible for the underwriters to claim against the sum paid into court as this would contemplate the ship owner having a right of action against himself. Lord Penzance stated the position that it would be “an absurdity, and a thing unknown to the law” for a person to have a right of action against himself (at 288). In the same vein, it would be a logical impossibility for an obligor of a chose in action to hold that chose in trust for the obligee.

  107. [62] In any event, even if this were possible and the LFX and Bullion customers had somehow vested the choses they had against MFGS in MFGS itself as trustee, it would not give them any proprietary rights to MFGS’ moneys. The claims would remain debts provable in MFGS’ winding up. However, this is not the argument Vintage advances. Vintage’s argument is that MFGS was required by statute to segregate funds amounting to the value of the Unrealised Profits and Forward Value and hold these segregated funds on trust for the LFX and Bullion customers or, alternatively, did so voluntarily.

  108. [63] Vintage relies on the case of Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 (“Mac-Jordan”) to support this position. In Mac-Jordan, the plaintiff was a building contractor, and the defendant was a property developer. The contract between the parties provided for interim payments against architect’s certificates, but entitled the defendant to retain 3% from each certified amount. The contract also imposed an obligation on the defendant to set aside as a separate trust fund a sum equal to the sums the defendant was entitled to retain. However, the defendant did not set aside any moneys. Subsequently, the defendant became insolvent. The contest was between the plaintiff and a bank which had a floating charge over the defendant’s assets. The plaintiff argued that even though the requisite fund was not appropriated, the contractual obligation to segregate the moneys operated to confer on the plaintiff an equitable interest in the notional fund that ought to have been segregated by the defendant.

  109. [64] Scott LJ (with whom Parker and Farquharson LJJ agreed) rejected this argument, holding that the plaintiff had to show either that it had an equitable interest in identifiable assets, or that the bank was bound in equity to permit the plaintiff’s contractual right that the defendant segregate the retained sums to have effect. The English Court of Appeal found that there were no identifiable assets impressed with trusts which could be said to be applicable to the retention fund. As for the second point, the court also found that the plaintiff had no equity against the bank to require the bank to make available funds from the floating charge in order for a retention fund in favour of the plaintiff to be set up. Scott LJ considered that the contractual obligation was only an “unsatisfied and unsecured contractual right for the payment of money”. The defendant’s obligation to segregate the moneys was, on Scott LJ’s analysis, “no more than an obligation to pay money, the payee being [the defendant] itself as trustee” (at 358–359).

  110. [65] Unlike the defendant in Mac-Jordan, MFGS had in the present case segregated funds daily to cover its obligations to the LFX and Bullion customers in respect of the Unrealised Profits and Forward Value. This, Vintage submits, is the critical and defining factor. In order to show that it has a proprietary interest over those segregated funds, Vintage seeks to establish that the relevant statutory provisions required MFGS to hold those funds on statutory trust, or that the relevant statutory provisions imposed a trust over such funds. Alternatively, Vintage seeks to show that MFGS had done so with the intention of settling an express trust. I turn first to the Statutory Trust issue.

  111. The Statutory Trust issue

  112. Principles of statutory interpretation

  113. [66] The question whether a statutory trust arises over the funds segregated by MFGS to cover its Unrealised Profits and Forward Value obligations is a question of statutory interpretation. Evidence of how MFGS treated the Unrealised Profits and Forward Value is therefore not relevant to this issue.

  114. [67] In interpreting the SFA, CTA, SFR and CTR, the court’s starting point is s 9A of the Interpretation Act (Cap 1, 2002 Rev Ed) (“Interpretation Act”), which provides that statutes should be interpreted in a manner that would promote the purpose or object of the written law. It should be pointed out that under s 1 of the Interpretation Act, “written law” includes “all Acts … and subsidiary legislation made thereunder for the time being in force in Singapore”. Thus, a purposive interpretation must be given to both the SFR and CTR as well. V K Rajah JA (sitting in the High Court) in Public Prosecutor v Low Kok Heng [2007] 4 SLR(R) 183 summarised the approach to be taken under s 9A of the Interpretation Act as such (at [57]):

  115. [68] Thus, and as Vintage submits, the language of a particular statutory provision is the framework within which the legislative purpose must expressly or implicitly manifest, and the court should not construe statutes in a manner that would re-write the words of the statute.

  116. [69] Besides the principle of purposive interpretation, the Liquidators also submit that a statute should not be taken as fundamentally altering the common law unless it uses words that point unmistakably to that conclusion. This principle has been applied by the Court of Appeal in Ying Tai Plastic & Metal Manufacturing (S) Pte Ltd v Zahrin bin Rabu [1983–1984] SLR(R) 212 at [19], and more recently by Rajah JA (sitting in the High Court) in Goldring Timothy Nicholas and others v Public Prosecutor [2013] 3 SLR 487 at [51]. On this basis, the Liquidators argue that the court should be slow to construe the SFA and CTA and the regulations promulgated under these Acts as changing the fundamental nature of a trust, when the statutes have not expressly provided so.

  117. [70] Nonetheless, I note that a statutory trust is created by statute essentially stipulating that the legal owner of certain property is not to have beneficial ownership of that property. It may not “bear all the indicia which characterise a trust as it was recognised by the Court of Chancery apart from statute” (see Ayerst (Inspector of Taxes) v C. & K. (Construction) Ltd [1976] AC 167 (“Ayerst”) at 178 cited in Power Knight Pte Ltd v Natural Fuel Pte Ltd (in compulsory liquidation) and others [2010] 3 SLR 82 at [50]).

  118. [71] In In the matter of the intervention into the solicitors’ practices known as Ahmed & Co [2006] EWHC 480 (Ch), Justice Lawrence Collins considered the concept of a statutory trust in the context of the exercise of the English Law Society’s regulatory functions under the Solicitors Act 1974 (c 47) (UK). Collins J stated (at [111] and [113]):

  119. In the final analysis, what falls within the ambit of the statutory trust and the obligations of a statutory trustee are matters of statutory interpretation, to be analysed with reference to the specific applicable statutory provisions.

  120. The Bullion transactions

  121. (1) Whether the CTA and CTR apply to the Bullion transactions

  122. [72] The long title of the CTA provides that it is “An Act for the regulation of certain types of commodity trading, and for matters connected therewith”. These concern the licensing of commodity brokers, the accounts to be kept by commodity brokers, and the conduct of commodity trading business among other things.

  123. [73] Section 2 of the CTA defines “commodity” as:

  124. Commodity futures contracts are excluded from the definition of “commodity” under s 2 of the CTA as these contracts are governed by the SFA instead (see [82] below). Section 2 of the CTA provides that a “commodity futures contract” is:

  125. [74] The Bullion transactions were not commodity futures contracts as they were not carried out pursuant to the business rules or practices of a futures market. Instead, as Mr Yap deposed in his affidavit, the Bullion transactions were “cash-settled leveraged bullion (gold or silver) spot contracts”. The LFX and Bullion Report prepared by the Liquidators states that these Bullion transactions mirrored the price movements of the underlying reference bullion without involving ownership of the reference bullion. These were therefore “leveraged commodity trading” under s 2 of the CTA, which is defined as, inter alia:

  126. [75] Thus, on a general level, the CTA and CTR apply to the Bullion transactions. At the hearing, Mr Yeap clarified that the Liquidators do not dispute this. The more specific issue raised by the Liquidators is whether the statutory trust and segregation obligations under the CTA and CTR apply to MFGS and to the Bullion transactions. This will be considered below in the context of the relevant provisions.

  127. (2) The relevant provisions under the CTA and CTR

  128. [76] The primary provision in the CTA is s 30 which states:

  129. [77] Under s 63(1) of the CTA, the International Enterprise Singapore (“IE Singapore”) Board is vested with power to “make regulations for carrying out the purposes and provisions of [the CTA] and for the due administration thereof”. The relevant regulations made in the CTR pursuant to, inter alia, ss 30 and 63 of the CTA, are:

  130. [78] As can be seen, s 30 of the CTA deals largely with the making of regulations, and does not set out in great detail the substantive obligations of a commodity broker. Thus, the main provisions which set out the scope of a commodity broker’s obligations are to be found in regs 21 and 22 of the CTR. In my view, insofar as regs 21(1)(a) and 22(1) of the CTR state that a commodity broker shall treat certain funds as belonging to that customer, this is language which imposes a statutory trust over money, securities or property falling within its ambit. Admittedly, the provisions do not expressly use the term “statutory trust”. However, I find that this is in substance what the provisions provide for. The clear implication of regs 21(1)(a) and 22(1) is that a commodity broker will not be able to dispose of the funds falling within the scope of regs 21(1)(a) and 22(1) for its benefit. This is consistent with s 30(3) of the CTA which prohibits a commodity broker from using money, securities or property held in a separate trust account as required by the CTR for the payment of the commodity broker’s debts. These provisions effectively disallow a commodity broker from using such moneys beneficially in the course of its business, which is the fundamental feature of a trust, viz, that the beneficial ownership of these funds is vested in the customer. This protection is supplemented by further provisions which impose segregation obligations (see for example regs 21(1)(b) and 22(2) of the CTR).

  131. (3) The purpose and object of the statutory trust and the segregation obligations in the CTA and CTR

  132. [79] Before analysing the relevant provisions further, I briefly consider the purpose and object of the statutory trust and the segregation obligations.

  133. [80] The CTA was enacted in 1992 as the Commodity Futures Act 1992 (Act 17 of 1992) (“the Commodity Futures Act”) to regulate trading in rubber futures contracts and other commodities, beginning with trading in rubber futures contracts (see Singapore Parliamentary Debates, Official Report (20 March 1992) vol 59 at cols 1345–1348 (BG Lee Hsien Loong, Minister for Trade and Industry) (“the Second Reading of Commodity Futures Act”)). Section 30 of the Commodity Futures Act provided for the segregation of “customer’s funds”. The relevant regulations at the time were to be found in regs 22 and 23 of the Commodity Futures Regulations (Cap 48A, Rg 1, 1993 Rev Ed) (“CFR”). In relation to these provisions, the Minister explained that (at col 1347):

  134. [81] In 2001, the Commodity Futures Act was renamed the “Commodity Trading Act”. Parliament also amended the Act in order to expand its scope to deal with not just commodity futures contracts, but also commodity forward contracts, trading in differences, leveraged commodity trading and certain forms of spot commodity trading (see Commodity Futures (Amendment) Act 2001 (No 22 of 2001)). This change was prompted by the rise of “bucket shops”. Parliament also enacted provisions to require persons who wished to engage in such commodity trading activities to apply for a licence under the CTA. In this regard, in Parliament, the Acting Minister for Trade and Industry (“Acting Minister”) stated (Singapore Parliamentary Debates, Official Report (16 May 2001) vol 73 at col 1714–1719 (Peter Chen, Acting Minister for Trade and Industry) (“the Bucket Shop Debate”) at col 1715):

  135. [82] Subsequently in 2007, Parliament amended the CTA once more to “transfer regulatory oversight of commodity futures trading from IE Singapore under the CTA to MAS under the SFA and [Financial Advisers Act]” (see Singapore Parliamentary Debtates, Official Report (17 July 2007) vol 83 at col 1223 (Lim Hng Kiang, Minister for Trade and Industry)). The result of these amendments was that commodity futures transactions were governed by the provisions of the SFA, with MAS acting as the regulator. IE Singapore retained regulatory oversight of over-the-counter commodity derivatives and spot commodity contracts under the CTA.

  136. [83] Despite these numerous amendments, the obligations originally enacted in s 30 of the Commodity Futures Act and reg 22 and 23 of the CFR remain materially unchanged. In my view, the Second Reading of the Commodity Futures Act and the Bucket Shop Debate show that the provisions relating to the statutory trust as well as segregation under the CTA and CTR were enacted for the purpose of protecting consumers and investors, and to ensure that customers’ funds are not misused. With this understanding, I now consider whether these provisions apply to MFGS.

  137. (4) Whether the statutory trust and segregation obligations under the CTA and CTR apply to MFGS

  138. (A) Parties’ submissions

  139. [84] Vintage takes the position that the requirements under s 30 of the CTA and under regs 21 and 22 of the CTR apply to any person who acts as a “commodity broker” within the meaning of the CTA. As MFGS carried on “leveraged commodity trading” through the Bullion transactions, it acted as a “commodity broker” under the CTA. Therefore, these provisions apply to MFGS and the Bullion transactions.

  140. [85] The Liquidators do not quarrel with Vintage’s submissions that MFGS acted as a “commodity broker”. However, the Liquidators submit that the regulations made under s 30 of the CTA do not apply to MFGS and the Bullion transactions as Vintage and the other Bullion customers were not “customers” as defined by s 30(6) of the CTA. They argue that s 30(6) specifically limits the application of the statutory trust and segregation obligations to a customer “on whose account the commodity broker carries on trading” [emphasis added]. The Liquidators submit that the phrase “on whose account” should be interpreted to mean “on behalf of”, and the use of the phrase shows that the statutory trust and segregation obligations prescribed under s 30 of the CTA apply only to situations where the commodity broker acts as an agent on behalf of the customer, holding moneys, securities and property which are beneficially owned by the customer.

  141. [86] The Liquidators also refer to the Bucket Shop Debate (reproduced at [81] above), and argue that Parliament’s intention is to protect customers’ moneys only where the broker “trade[s] on the investor’s behalf”. Since MFGS contracted with the LFX and Bullion customers on a principal-to-principal basis, the provisions do not apply to MFGS.

  142. (B) Analysis and findings

  143. [87] I accept Vintage’s submission that the statutory trust and segregation obligations made under s 30 of the CTA apply to any person who acts as a “commodity broker”. In my judgment, MFGS is a “commodity broker” under the CTA and CTR.

  144. [88] Section 2 of the CTA defines a “commodity broker” as:

  145. [89] Put simply, a commodity broker is defined in the CTA as a person who accepts orders for the purchase or sale of “any commodity” by way of or relating to “any commodity contract”. The definition also makes clear that a commodity broker may act as both principal and agent. I have set out the definition of “commodity” under the CTA above at [73]. Under s 2 of the CTA, a “commodity contract” is defined as:

  146. [90] The Bullion transactions were over-the-counter “leveraged commodity trades” (as defined under s 2 of the CTA, see [74] above). In respect of these trades, MFGS acted as its customers’ direct counterparty. Thus, by virtue of carrying out “leveraged commodity trading” with its customers as principal, MFGS fell under the definition of “commodity broker” under the CTA.

  147. [91] The evidence also shows that MFGS appeared to accept the applicability of the CTA without qualification. The MTA makes multiple references to the CTA. MFGS also states in the Risk Disclosure Statement that the section that deals with “Commodity Contracts” therein is provided in accordance with s 32(1) of the CTA.

  148. [92] I do not accept the Liquidators’ arguments that there is a further qualification, and that by virtue of the definition of “customer” under s 30(6), s 30 of the CTA and the regulations in the CTR do not apply to MFGS. The general definition of customer under s 2 of the CTA and the specific definition in s 30(6) of the CTA are similar in material respects. The definition of “customer” in s 2 of the CTA provides:

  149. Similarly, for the purposes of s 30 of the CTA, s 30(6) provides that:

  150. [93] It is true, as the Liquidators argue, that the definition in s 30(6) is narrower than the definition in s 2 of the CTA. However, it is only narrower in that “directors, employees and representatives and related corporations of the commodity broker” are excluded from the definition of “customer” for the purposes of s 30 and any regulations prescribed. These persons, it may be pointed out, are all persons connected with the commodity broker. To that extent, s 30(6) makes clear that the commodity broker does not need to segregate funds for “customers” who are related or connected persons or entities. However, there is no merit in the argument that based on this narrowed definition, the obligations imposed by s 30 of the CTA and the attendant regulations apply only to situations where the broker acts as agent, while the other obligations imposed by the CTA on commodity brokers are not thus confined.

  151. [94] I am also not persuaded that the Bucket Shop Debate (see [81] above) sheds much light on the phrase “on whose account” in s 30(6) of the CTA. In the first place, although the Acting Minister used the phrase “on the investor’s behalf”, this does not necessarily mean that Parliament had intended to limit the scope of protection under s 30 only to situations where the commodity broker acts as agent on behalf of another. As pointed out earlier, these provisions were first introduced in the Commodity Futures Act and the CFR, which antedated the Bucket Shop Debate, and have remained substantially unchanged since (see [80]–[83] above). In fact, the Commodity Futures Act already contained the narrower definition of “customer” in s 30(6) alongside the broader general definition of “customer” under s 2 of the Commodity Futures Act. As stated above at [83], the purpose and object of these provisions is the protection of consumers and investors. In this context, the court should not interpret the law narrowly.

  152. [95] Further, the interpretation of the phrase “on whose account a commodity broker carries on trading in any commodity contract” turns on the definition of “account”. The term “account” possesses many meanings, and may be used as a noun or as a verb, depending on the context. Black’s Law Dictionary (Bryan A Garner chief ed) (Thomson Reuters, 10th Ed, 2014) (“Black’s Law Dictionary”) gives the following definitions of “account” as a noun (at p 20–21):

  153. Black’s Law Dictionary also defines the term “account for”, which is a verb, as (at p 23):

  154. [96] The Oxford English Dictionary vol 1 (Clarendon Press, 2nd Ed, 1989) (“Oxford English Dictionary”) defines the term “on account” and “on account of” as (at p 86):

  155. [97] In my opinion, the term “account” takes its meaning from the context in which it is used. A “customer” under the CTA and CTR is one who possesses a brokerage account with a commodity broker under which trades in commodity contracts are entered into and charged to his or her expense. I find that this accords with a purposive interpretation of the CTA and is also aligned with the daily practice of MFGS. Whenever counterparties entered into an LFX or Bullion transaction, MFGS would issue in the Daily FX Activity Statement of that particular day a trade confirmation (see [14(a)] above). The confirmation would state that “the following trades have been made this day for your account and risk” [emphasis added]. A person who possesses an account with MFGS is conventionally referred to as a “customer”, and indeed, MFGS refers to such persons as “customers” in the MTA. Any other interpretation would be artificial.

  156. [98] It is also significant that where appropriate, the CTA and CTR make a distinction between situations where a commodity broker acts as an agent or as a principal. One example of this distinction is within the definition of “commodity broker” itself (see [88] above) – the CTA makes clear that an agent or principal counterparty may both be considered “commodity brokers”. Another illustration of this may be found in reg 24 of the CTR. Regulation 24(1) provides that a commodity broker should “furnish to his customers a written confirmation of each contract executed by the broker on behalf of that customer” [emphasis added]. Regulation 24(2)(b) then provides that if “the broker is dealing as principal” [emphasis added] the written confirmation should provide a statement that he is acting as such. Consequently, if s 30 of the CTA is meant to be restricted only to situations where a commodity broker acted as agent, the CTA would have expressly stated so.

  157. [99] One last miscellaneous point ought to be addressed. MFGS (and its predecessor, Man Financial (S) Pte Ltd) was licensed by IE Singapore as a “Commodity Futures Broker” from 1995 to 30 June 2008. After the transfer of regulatory jurisdiction over commodity futures contracts from IE Singapore to MAS, MFGS took the view that it was no longer required to be licensed, and accordingly did not apply for a further licence post-July 2008. This is not an issue in these proceedings. However, I note that there are exemptions to the licensing requirement which are set out under the Schedule of the CTA. Additionally, I note that the segregation obligations under s 30 apply to a “commodity broker” and not to a licensed person. Separately, under reg 21(5) of the CTR, the IE Singapore Board may also exempt a commodity broker from the requirements under reg 21(1) of the CTR, subject to terms and conditions which provide reasonable protection for customers. As Vintage points out, there is no evidence of IE Singapore exempting MFGS from the requirements under reg 21(1) of the CTR. Consequently, for the reasons given above, I find that s 30 of the CTA and the relevant regulations within the CTR apply to MFGS, and to the Bullion transactions.

  158. (5) Whether the Unrealised Profits and Forward Value (attributable to Bullion transactions) are “money … accruing to a customer”

  159. [100] As I have stated above at [78], the main provisions which impose the statutory trust and lay down substantive obligations on a commodity broker in relation to customers’ funds are to be found in regs 21 and 22 of the CTR. Regulation 21(1)(a) of the CTR requires a commodity broker to treat and deal with (i) all money, securities or property received by a commodity broker from a customer to margin, guarantee or secure contracts in commodity trading (limb (i) of reg 21(1)(a)), and (ii) all money, securities or property accruing to a customer as a result of such trading (limb (ii) of reg 21(1)(a)), as belonging to the customer. Under reg 21(1)(b), the commodity broker is required to account in a separate trust account, designated or evidenced as such, for money received from the customer or accruing to the customer pursuant to reg 21(1)(a).

  160. [101] It appears to me that it is reg 21(1)(a) which delineates the scope of the statutory trust and the funds that MFGS is required to segregate. Interpreting reg 21(1)(a) in line with the legislative intention of protecting customers’ funds, I find that this statutory trust arises on the receipt or accrual of the money, securities or property. In other words, where money, securities or property is received from a customer or accrues to a customer in accordance with reg 21(1)(a), they are, by operation of reg 21(1)(a), beneficially owned by the customer. Consequently, a customer may assert proprietary rights to the money, securities or property if the money, securities and property falling within the scope of the statutory trust are identifiable. In this regard, the obligations to segregate these funds pursuant to regs 21(1)(b), 22(1) and 22(2) do not create the trust, but are obligations which flow from the imposition of the statutory trust over certain property by reg 21(1)(a) and provide additional protection to ensure that customers’ moneys subject to the statutory trust are not dissipated or misused.

  161. [102] Evidently, money received by MFGS from a customer to margin Bullion transactions is “money received by [MFGS] from a customer to margin … contracts in commodity trading” and therefore falls within the first limb of the statutory trust (viz, limb (i) of reg 21(1)(a)). I pause to note that this statutory obligation is in fact contrary to the terms of the contract between MFGS and its customers (see cl A6.8 of the MTA set out at [45] above) and affords the customers a greater degree of protection than they would otherwise possess under the MTA. However, it is not so clear from the language of reg 21(1)(a) itself whether the statutory trust also captures the Unrealised Profits, Forward Value and Ledger Balance C/F.

  162. (A) Parties’ submissions

  163. [103] Vintage argues that the Unrealised Profits and Forward Value represented moneys “accruing to” Vintage as a result of commodity trading. Vintage submits that the concept of “accruing” should be interpreted as referring to moneys which a party is “entitled to” after having done all that is required of it to earn that sum, even if such sums are not yet due and payable. Hence, even if the Unrealised Profits and Forward Value were not contractually payable debts, moneys segregated to cover these obligations should still be construed as “accruing to” Vintage as Vintage was already entitled to these moneys.

  164. [104] The Liquidators do not propose a different interpretation of the term “accruing to”. However, they argue that no statutory trust can arise over the Unrealised Profits and Forward Value as it would be a trust over choses in action, and not over any actual underlying moneys. The Liquidators point out that neither the CTA nor the CTR state that a commodity broker would be required to pay actual moneys into the Customer Segregated Accounts on account of debts payable in the future, with the result of a trust being created over physical moneys. In this regard, I also refer to the Liquidators’ submission above at [69], that the court should be slow to construe legislation as changing the fundamental nature of a trust. Having taken the position that the statutory trust and segregation obligations within the CTA and CTR do not apply to MFGS and the Bullion transactions, the Liquidators also adopt the position that the Ledger Balance C/F is held on trust for their customers on a “purely voluntary” basis, and “not as a consequence of any (inapplicable) segregation obligations under the CTA”.

  165. (B) Analysis and findings

  166. [105] The crux of the issue is whether the Unrealised Profits, Forward Value and Ledger Balance C/F can be said to be “money … accruing to a customer as a result of [commodity trading]”. Vintage does not contend that there is “property” or “securities” accruing to the Bullion customers. However, I note that “property” is defined under reg 2 of the CTR as including:

  167. As analysed above at [41]–[55], what MFGS represented in Vintage’s Daily FX Activity Statements as Unrealised Profits and Forward Value are, on deeper legal analysis, choses in action (in the nature of contingent debts or certain debts payable at a future date by MFGS to Vintage) that Vintage had against MFGS, and which vested, at all times in Vintage. The Unrealised Profits and Forward Value thus fall within the meaning of “property” in the CTR. Nonetheless, as the choses always vested in the customer vis-à-vis MFGS in the principal-to-principal transactions, they do not form property in MFGS’ hands that MFGS is able to hold on trust or segregate.

  168. [106] To the extent that Vintage argues that money (as opposed to property) amounting to the value of Unrealised Profits and Forward Value had been segregated by MFGS, thereby forming the proprietary basis of a statutory trust, this requires Vintage to show that this is money accruing to Vintage. I note at the outset that there is no definition of “money” within the CTA or the CTR. In my view, the term, when used in the context of the CTA and CTR, may be broadly understood. For example, reg 22(5) of the CTR states that customers’ moneys deposited with any bank must be deposited under an account name which clearly identifies such moneys as customers’ moneys and shows that such moneys are segregated in the manner which reg 21 of the CTR requires. Thus, the term “money” in this context means actual physical money, as well as “money” in bank or other accounts (although this is not a strictly accurate analysis of a bank account: see Professor Hudson’s analysis of this above at [51]).

  169. [107] There is also no definition of the phrase “accruing to” under the CTA or CTR. The Oxford English Dictionary defines the term “accrue” as (at p 90):

  170. [108] Black’s Law Dictionary defines the term “accrue” as (at p 25):

  171. [109] Vintage cites cases from three legal contexts, viz, income tax law, garnishee proceedings and the accrual of causes of action, as part of its effort to urge the court that money should be treated as “accruing to” a customer as a result of commodity trading when the customer has done all that is required of it to earn that sum, even if such sums were not due and payable.

  172. [110] Section 10(1) of the Income Tax Act (Cap 134, 2014 Rev Ed) (“Income Tax Act”) provides that income tax is payable upon “the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore” [emphasis added]. The cases which discuss the concept of accruing income deal largely with whether certain payments received by a taxpayer could be considered as “income”. In Pinetree Resort Pte Ltd v Comptroller of Income Tax [2000] 3 SLR(R) 136, the Court of Appeal interpreted the term “accrue” in the context of s 10(1) of the Income Tax Act to mean “to which any person has become entitled” (at [23]). This was followed by Andrew Phang Boon Leong JA in ABD Pte Ltd v Comptroller of Income Tax [2010] 3 SLR 609 (“ABD Pte Ltd”).

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