Jiang Ou v EFG Bank AG: Employee Fraud, Unauthorized Trading, and Conclusive Evidence Clauses

In Jiang Ou v EFG Bank AG, the High Court of Singapore ruled in favor of Jiang Ou, holding EFG Bank liable for US$2,338,278.68 in losses resulting from 160 unauthorized transactions executed by its employee, Mr. Ng. The court found that EFG Bank failed to prove that transaction documents were sent to Mdm Jiang, thus the conclusive evidence clauses in the agreement did not apply. The court also determined that even if the documents had been sent, the clauses did not cover unauthorized transactions carried out fraudulently by the bank's own employee. The claim was for breach of contract.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

EFG Bank was found liable for unauthorized trades by its employee, despite conclusive evidence clauses, due to failure to prove document delivery and the clauses' inapplicability to employee fraud.

1.7 Decision Date

8 June 2011

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Jiang Ou	Plaintiff	Individual	Judgment for Plaintiff	Won	Lawrence Quahe, Chenthil Kumarasingam, Kenneth Lim
EFG Bank AG	Defendant	Corporation	Judgment against Defendant	Lost	Siraj Omar

3. Judges

Judge Name	Title	Delivered Judgment
Steven Chong	Judge	Yes

4. Counsels

Counsel Name	Organization
Lawrence Quahe	Lawrence Quahe & Woo LLC
Chenthil Kumarasingam	Lawrence Quahe & Woo LLC
Kenneth Lim	Lawrence Quahe & Woo LLC
Siraj Omar	Premier Law LLC

4. Facts

Mdm Jiang opened a non-discretionary account with EFG Bank under the Monetary Authority of Singapore Financial Investor Scheme.
Mr. Ng, an employee of EFG Bank, executed 160 high-volume and/or high-risk leveraged foreign exchange and securities transactions.
Mdm Jiang did not authorize the 160 transactions.
Mr. Ng confessed to executing the 160 transactions without Mdm Jiang's knowledge or consent.
EFG Bank initially denied that the 160 transactions were unauthorized.
EFG Bank later admitted that it did not have any record of specific instructions from Mdm Jiang for the 160 transactions.
Mdm Jiang's FIS Account suffered a loss of US$2,338,278.68 as a result of the 160 transactions.

5. Formal Citations

Jiang Ou v EFG Bank AG, Suit No 1055 of 2009, [2011] SGHC 149

6. Timeline

Date	Event
2008-06-02	Mdm Jiang opened a non-discretionary account with EFG Bank.
2008-07-24	Mdm Jiang deposited funds into her FIS Account.
2008-08-14	Mdm Jiang deposited funds into her FIS Account.
2008-08-15	Mdm Jiang opened another portfolio account.
2008-08-16	Mr Ng advised Mdm Jiang to convert FIS monies into Australian Dollars.
2008-08-05	EFG Bank executed a series of leveraged foreign exchange and securities transactions.
2009-04-01	EFG Bank executed a series of leveraged foreign exchange and securities transactions.
2009-04-01	Mr Ng confessed to unauthorized transactions.
2009-09-11	Mdm Jiang met with Mr. Kees Stoute of EFG Bank.
2009-09-18	Mdm Jiang met with EFG Bank's representatives.
2009-12-15	Mdm Jiang commenced action against EFG Bank.
2011-03-28	Trial began.
2011-06-09	Judgment reserved.

7. Legal Issues

Breach of Contract
- Outcome: The court found that EFG Bank breached the agreement by executing unauthorized transactions without Mdm Jiang's knowledge or consent.
- Category: Substantive
- Sub-Issues:
  - Unauthorized Transactions
  - Failure to Obtain Instructions
Conclusive Evidence Clauses
- Outcome: The court held that the conclusive evidence clauses did not apply to unauthorized transactions carried out fraudulently by EFG Bank's employee and, even if they did, they would be unenforceable under UCTA and contrary to public policy.
- Category: Substantive
- Sub-Issues:
  - Applicability to Unauthorized Transactions
  - Exclusion of Liability for Employee Fraud
  - Reasonableness under UCTA
Burden of Proof
- Outcome: The court found that EFG Bank failed to discharge its burden of proof that the transaction documents were sent to Mdm Jiang, thus the presumption of delivery did not arise.
- Category: Procedural
- Sub-Issues:
  - Proof of Posting
  - Presumption of Delivery
- Related Cases:
  - [2006] 4 SLR(R) 273
  - [1998] 1 SLR(R) 824

8. Remedies Sought

Monetary Damages

9. Cause of Actions

Breach of Contract

10. Practice Areas

Commercial Litigation
Banking Litigation

11. Industries

Banking
Finance

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Bache & Co (London) Ltd v Banque Vernes et Commerciale de Paris SA	N/A	Yes	[1973] 2 Lloyd’s Rep 437	N/A	Cited for the principle that banks are generally considered honest and reliable.
Pertamina Energy Trading Limited v Credit Suisse	Court of Appeal	Yes	[2006] 4 SLR(R) 273	Singapore	Cited for the principle that the defendant bank bears the burden of proving that account statements were effectively dispatched and for the discussion of conclusive evidence clauses.
Ri Jong Son v Development Bank of Singapore Ltd	N/A	Yes	[1998] 1 SLR(R) 824	Singapore	Cited for the principle that the defendant bank bears the burden of proving that account statements were effectively dispatched.
Tjoa Elis v United Overseas Bank	N/A	Yes	[2003] 1 SLR(R) 747	Singapore	Cited for the discussion of the burden of proof regarding the posting of bank statements.
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd and others	Privy Council	Yes	[1986] AC 80	N/A	Cited for the principle that, absent properly drafted provisions, the common law does not impose a direct duty on customers to verify bank statements.
The Kepitigalla Rubber Estates Limited v The National Bank of India Limited	N/A	Yes	[1909] 2 KB 1010	N/A	Cited for the principle that, in the absence of any express agreement, a customer does not owe a duty to the bank to check his bank statements.
Canadian Pacific Hotels Ltd v Bank of Montreal	N/A	Yes	[1988] 40 DLR (4th) 385	N/A	Cited for the principle that customers are not duty bound to inform the bank of discrepancies or errors in their bank statements absent a contractual provision.
United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd	N/A	Yes	[1993] 1 MLJ 182	N/A	Cited for the principle that no duty is imposed upon the customer to inspect his periodical bank statements to ensure that his account is being properly maintained by the bank in the absence of a contract to the contrary.
Fried v National Australia Bank Ltd	N/A	Yes	[2001] 111 FCR 322	N/A	Cited as following the principle in Tai Hing Cotton.
National Bank of New Zealand Ltd v Walpole and Patterson Ltd	N/A	Yes	[1975] 2 NZLR 7	N/A	Cited as following the principle in Tai Hing Cotton.
Canadian Pacific Hotels Ltd v Bank of Montreal	N/A	Yes	[1987] 40 DLR (4th) 385	N/A	Cited as following the principle in Tai Hing Cotton.
Canara Bank v Canara Sales Corporation	N/A	Yes	[1987] (2) AIR SC 1603	N/A	Cited as following the principle in Tai Hing Cotton.
Big Dutchman (South Africa) v Barclays National Bank	N/A	Yes	[1979] (3) SA 267 (WLD.)	N/A	Cited as following the principle in Tai Hing Cotton.
Holzman v Standard Bank	N/A	Yes	[1985] (1) SA 360 (WLD)	N/A	Cited as following the principle in Tai Hing Cotton.
National Bank of Australia v Hokit Pty Ltd	New South Wales Court of Appeal	Yes	[1996] 39 NSWLR 377	Australia	Cited for the principle that banks can contract upon the basis of an express term imposing a duty on the customer.
Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association	N/A	Yes	[1992] 2 SLR(R) 195	Singapore	Cited for the discussion of conclusive evidence clauses and forged cheques.
Arrow Transfer Co Ltd v Royal Bank of Canada	N/A	Yes	(1972) 27 DLR (3d) 81	Canada	Cited for the distinction between forged indorsements and forged signatures of the drawer.
Stephan Machinery Singapore Pte Ltd v Oversea-Chinese Banking Corp Ltd	N/A	Yes	[1999] 2 SLR(R) 518	Singapore	Cited for the discussion of conclusive evidence clauses and forged signatures.
RBS Coutts Bank Ltd v Shishir Tarachand Kothari	High Court	Yes	[2009] SGHC 273	Singapore	Cited for the discussion of conclusive evidence clauses and unauthorized transactions, although the court found the transactions were authorized.
Banque National de Paris v Tan Nancy & Anor	Court of Appeal	Yes	[2001] SGCA 76	Singapore	Cited for the discussion of transactions authorized by the customer.
HIH Casualty & General Insurance Ltd v Chase Manhattan Bank	N/A	Yes	[2003] 1 All ER (Comm) 349	N/A	Cited for the principle that parties contemplate honesty and good faith in the performance of their obligations.
Photo Production Ltd v Securicor Transport Ltd	N/A	Yes	[1980] AC 827	N/A	Cited for the non-interventionist approach to the reasonableness test in the context of commercial contracts.
Lazarus Estates Ltd v Beasley	N/A	Yes	[1956] 1 QB 702	N/A	Cited for the principle that fraud unravels all.
London Joint Stock Bank Ltd v Macmillian & Arthur	N/A	Yes	[1918] AC 777	N/A	Cited for the principle that a banker acts under the mandate of the customer.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Unfair Contract Terms Act (Cap 396, 1994 Rev Ed)	Singapore
Bills of Exchange Act (Cap 23, 2004 Rev Ed)	Singapore
Civil Law Act (Cap 43, 1988 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Non-Discretionary Account
Financial Investor Scheme
Conclusive Evidence Clause
Unauthorized Transactions
Breach of Contract
Burden of Proof
Good Faith
Instructions
Transaction Confirmation
Unfair Contract Terms Act

15.2 Keywords

Banking
Contract
Fraud
Unauthorized Transactions
Singapore
High Court
EFG Bank
Jiang Ou
Financial Investor Scheme
Conclusive Evidence Clause

16. Subjects

Banking
Contract Law
Civil Litigation

17. Areas of Law

Banking Law
Contract Law
Agency Law
Civil Procedure