Hwang Cheng Tsu Hsu v Oversea-Chinese Banking Corp: Bank's Duty of Care & Customer's Mental Capacity

Hwang Cheng Tsu Hsu, represented by her litigation representative Hsu Ann Mei Amy, sued Oversea-Chinese Banking Corporation Limited in the High Court of Singapore before Lai Siu Chiu J, judgment date 2010-05-25, for breach of contract and negligence after the bank refused to allow her to close her accounts. The court found that the bank did not breach its contractual obligations, as it had reasonable grounds to be concerned about Hwang's mental capacity and potential undue influence. The court ruled in favor of Oversea-Chinese Banking Corporation Limited.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Defendant

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

OCBC refused Hwang Cheng Tsu Hsu to close her accounts. The court found OCBC did not breach its duty of care, given concerns about her mental capacity.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Oversea-Chinese Banking Corp LtdDefendantCorporationJudgment for DefendantWon
Hwang Cheng Tsu Hsu (by her litigation representative Hsu Ann Mei Amy)PlaintiffIndividualClaim DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Jansen ChowRajah & Tann LLP
Adrian Wong Soon PengRajah & Tann LLP
Josephine LowAndrew Ee & Co
Michael Khoo, SCAndrew Ee & Co
Andrew Ee Chong NamAndrew Ee & Co

4. Facts

  1. Plaintiff, Hwang Cheng Tsu Hsu, wanted to close her accounts at Oversea-Chinese Banking Corporation Limited (OCBC).
  2. OCBC refused to allow the plaintiff to close her accounts and withdraw her funds.
  3. Plaintiff had been a customer of OCBC since 1989 and a private banking customer since December 2005.
  4. Plaintiff was accompanied by her adopted daughter, Amy Hsu, when attempting to close her accounts.
  5. OCBC staff observed the plaintiff appearing dazed and non-responsive during meetings.
  6. Amy Hsu gave instructions on behalf of the plaintiff, raising concerns about the plaintiff's capacity.
  7. The plaintiff could not recall recent events, including a visit to the bank two days prior.
  8. The plaintiff gave inconsistent answers regarding her relationship with Amy Hsu and her desire to close her accounts.
  9. Medical reports indicated the plaintiff suffered from mild dementia, affecting her short-term memory.
  10. The bank was concerned about the plaintiff’s mental capacity and potential undue influence from Amy Hsu.

5. Formal Citations

  1. Hwang Cheng Tsu Hsu (by her litigation representative Hsu Ann Mei Amy) v Oversea-Chinese Banking Corp Ltd, Suit No 610 of 2008, [2010] SGHC 160

6. Timeline

DateEvent
Plaintiff formally adopted Amy Hsu
Plaintiff was widowed
Plaintiff became a customer of the Bank
Plaintiff executed a Will
Plaintiff started seeing a doctor for memory disorder
Plaintiff consulted Dr. Teo for xerodermatitis
Plaintiff executed a power of attorney appointing Michael Hwang and Frances Hwang as her attorneys
Plaintiff became a private banking customer of the Bank
Plaintiff sustained a fall at home
Michael Hwang, jointly with the plaintiff, gave instructions to the Bank to place a sum of $3,497,671.08 in a fixed deposit account in the plaintiff’s name
Plaintiff executed a new will
Plaintiff was examined by Dr. Lim
Plaintiff was examined by Dr. Kang
Plaintiff was examined by Dr. Kang
Plaintiff was seen by Dr. Sitoh
Dr. Lim examined the plaintiff for the second time
Plaintiff and Amy attended the Bank to give instructions for the opening of a new joint account
Sar Lee and Eng Leong visited the plaintiff at her residence
Amy and the plaintiff arrived at the Bank’s premises
Dr. Lim diagnosed the plaintiff in his report
Amy's solicitor demanded an apology and an explanation from the Bank
Deed of Revocation dated
A fresh power of attorney was purportedly executed by the plaintiff
The Bank informed AE that the Bank needed confirmation from the plaintiff that the Bank was authorised to disclose privileged customer information to AE
AE enclosed a letter dated 6 June 2008 which stated that AE was fully authorised to write to the Bank by the letter dated 28 May 2008
AE enclosed a letter dated 6 June 2008 which stated that AE was fully authorised to write to the Bank by the letter dated 28 May 2008
The Bank received a letter dated 16 June 2008 purportedly written by the plaintiff that appointed Amy
The Bank wrote on 17 June 2008 to AE, to say that as the signature in the letter dated 6 June 2008 differed from the plaintiff’s specimen signature, the Bank was unable to disclose any customer information to AE
The Bank received a letter dated 16 June 2008 purportedly written by the plaintiff that appointed Amy
The Bank replied on 19 June 2008 to the plaintiff to say that the self-authorizing letter dated 16 June 2008 was ineffective as it had not been signed by the plaintiff
AE wrote on 24 June 2008 to inquire how much longer the Bank intended to prolong the charade
AE wrote on 24 June 2008 in reply to the defendant’s letter dated 17 June 2008 and repeated the demand for an explanation for the alleged non-compliance with the plaintiff’s instructions
The Bank replied to AE on 9 July 2008 stating it had not had sight of a Warrant to Act signed by the plaintiff appointing AE as her solicitors
The Bank wrote to the plaintiff separately 9 July 2008, stating that as her bankers, they had a duty at law to “take reasonable steps to ensure that [the Bank] act only in accordance with [the plaintiff’s] instructions and not otherwise”
AE responded on 15 July 2008 challenging the Bank to “state the basis, medical or otherwise, for [its] assertion that [the plaintiff’s] health is a matter of concern”
The Bank wrote to the plaintiff on 18 July 2008 pointing out that the 2008 Power of Attorney raised more questions than answers
Dr. Sitoh saw the plaintiff
Amy complained to the Bank’s chairman
Amy complained about the Bank’s “unreasonable conduct” to the Monetary Authority of Singapore
Denis replied on the Bank’s behalf on 15 August 2008 stating that from its interaction with the plaintiff since around April 2008, the Bank came to believe that the plaintiff may not have the necessary mental capacity to provide the Bank with any instructions
In a letter dated 21 August 2008 from AE to the Bank’s solicitors (“R&T”), there was a volte face by the plaintiff
In its letter dated 28 August 2008, R&T accepted AE’s proposal and indicated that besides Eng Leong, two other officers of the Bank would attend the meeting together with the Bank’s counsel
The writ of summons herein was served on R&T on 2 September 2008
On 10 September 2008, AE replied to R&T to inquire who were the Bank’s two other officers who would be attending the meeting, adding that the plaintiff was not comfortable with Denis and did not want to see him
On 12 September 2008, R&T informed AE that the Bank no longer considered a meeting necessary, given that the matter was before the court
The Bank did not know of the plaintiff’s dementia until after legal proceedings had commenced (on 29 August 2008) when an affidavit was filed by Dr Lim on 3 October 2008
Dr Francis Ngui was appointed as the court expert by order of court dated 5 December 2008
Amy was appointed the plaintiff’s litigation representative
Dr Ngui conducted his first medical examination of the plaintiff
On 14 April 2009, the balance sum of monies in the plaintiff’s accounts with the Bank ($8,805,843.14) was paid into Court pursuant to an Order of Court dated 26 March 2009
Amy complained to her Member of Parliament at “a Meet-the-People” session prompting the latter to write to the Bank’s chief executive officer on 29 May 2009
Dr Ngui conducted his second medical examination of the plaintiff in the presence of Dr Sitoh
Dr Ngui’s report dated 19 October 2009
The Mental Capacity Act came into operation on 1 March 2010
The plaintiff passed away
Judgment reserved

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court held that the bank did not breach its contractual obligations to the plaintiff.
    • Category: Substantive
    • Sub-Issues:
      • Failure to follow customer instructions
      • Duty of care to customer
    • Related Cases:
      • [1996] 2 SLR(R) 774
      • [1968] 2 Lloyd's Rep 289
      • [1989] 1 WLR 1340
      • [1902] AC 543
      • [1992] 4 All ER 363
      • [2004] All ER (D) 183
      • [1879] 4 QBD 661
      • [1998] 1 SLR(R) 848
  2. Duty of Care
    • Outcome: The court held that the bank fulfilled its duty of care by acting prudently given concerns about the plaintiff's mental capacity.
    • Category: Substantive
    • Sub-Issues:
      • Reasonable care in executing customer orders
      • Duty to make inquiries
      • Duty to protect customer from fraud or undue influence
    • Related Cases:
      • [1996] 2 SLR(R) 774
      • [1968] 2 Lloyd's Rep 289
      • [1989] 1 WLR 1340
      • [1902] AC 543
      • [1992] 4 All ER 363
      • [2004] All ER (D) 183
      • [1879] 4 QBD 661
      • [1998] 1 SLR(R) 848
  3. Mental Capacity
    • Outcome: The court found that the bank had reasonable grounds to believe the plaintiff lacked the capacity to give valid instructions.
    • Category: Substantive
    • Sub-Issues:
      • Customer's capacity to give instructions
      • Bank's knowledge of customer's mental state
      • Effect of mental incapacity on existing mandate
    • Related Cases:
      • [1879] 4 QBD 661
  4. Authority of Agent
    • Outcome: The court found that the bank had reasonable grounds to doubt the authenticity of the power of attorney.
    • Category: Substantive
    • Sub-Issues:
      • Validity of power of attorney
      • Revocation of mandate
      • Duty to verify agent's instructions
    • Related Cases:
      • [1879] 4 QBD 661

8. Remedies Sought

  1. Monetary Damages
  2. Order to close accounts

9. Cause of Actions

  • Breach of Contract
  • Negligence

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation

11. Industries

  • Banking
  • Financial Services

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Yogambikai Nagarajah v. Indian Overseas Bank and another appealCourt of AppealYes[1996] 2 SLR(R) 774SingaporeClarified that a bank’s contractual duty to make payment on the demand of the account holder co-exists with a contractual duty to take reasonable care in all the circumstances as agent of the account holder.
Selangor United Rubber Estates Ltd v Cradock (No 3)N/AYes[1968] 2 Lloyd's Rep 289N/AAddressed a bank’s duty of care when a customer had been defrauded by the acts of the customer’s agents.
Lipkin Gorman v Karpnale LtdN/AYes[1989] 1 WLR 1340N/AAddressed the bank's duty of care when faced with what appears to be a genuine mandate presented by an agent acting within his authority.
Bank of New South Wales v Goulburn Valley Butter Company ProprietaryN/AYes[1902] AC 543N/AStates that in the absence of notice of fraud or irregularity a banker is bound to honour his customer's cheque.
Barclays Bank plc v. QuincecareN/AYes[1992] 4 All ER 363N/AHeld that it was an implied term of the contract between a bank and its customer that the bank would observe reasonable care and skill in and about executing the customer’s orders.
Verjee v. CIBC Bank Trust (Channel Islands) LimitedN/AYes[2004] All ER (D) 183N/AAddressed the bank's duty of care when the apparent signatory of the cheques is himself the account holder.
Drew v. NunnN/AYes[1879] 4 QBD 661N/AHighlighted that any pre-existing mandate between an agent and the principal is revoked upon the agent’s knowledge of the principal’s incapacity.
Bank of America National Trust Savings Association v. Herman Iskandar and anotherCourt of AppealYes[1998] 1 SLR(R) 848SingaporeConcerned with how the reasonable banker test should be applied in the context of whether a bank had been negligent in honouring a cheque drawn within the authority of its customer's agent without enquiries.
Yonge v ToynbeeN/AYes[1910] 1 K.B. 215N/AStates that when proceedings are brought by a third party on behalf of a mentally incapacitated party, that third party has represented himself as having the authority to bring proceedings and will be personally liable for costs.

13. Applicable Rules

Rule Name
Order 38 Rule 2(1) of the Rules of Court (Cap 322, R 5, 2006 Rev Ed)
Order 76 r 12(3) of the Rules

14. Applicable Statutes

Statute NameJurisdiction
Rules of Court (Cap 322, R 5, 2006 Rev Ed)Singapore
Mental Capacity Act (Cap 177A, 2010 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Duty of care
  • Mental capacity
  • Undue influence
  • Breach of contract
  • Power of attorney
  • Banking practice
  • Reasonable banker
  • Mandate
  • Inquiry
  • Irregularity
  • Dementia
  • Customer instructions
  • Joint account
  • Litigation representative

15.2 Keywords

  • banking
  • contract
  • mental capacity
  • duty of care
  • OCBC
  • Singapore
  • litigation

17. Areas of Law

Area NameRelevance Score
Mental Capacity Law90
Banking Law85
Contract Law70
Undue Influence60
Powers of Attorney50
Fiduciary Duties40
Civil Procedure30
Trust Law30
Wills and Probate25
Costs20

16. Subjects

  • Banking
  • Contract Law
  • Mental Health Law
  • Civil Litigation