Deutsche Bank v Chang: Private Banking, Duty of Care & Misrepresentation

Deutsche Bank AG sued Dr. Chang Tse Wen in the High Court of Singapore for US$1,788,855.41 outstanding from his private wealth management account. Dr. Chang counterclaimed for damages, alleging misrepresentation, breach of duty of care, and breach of fiduciary duty by Deutsche Bank and its relationship manager, Mr. Wan Fan Ting. The court found that Deutsche Bank breached its duty of care to Dr. Chang, awarding him US$49,047,721.12 in damages and dismissing Deutsche Bank's claim.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for the defendant, Dr. Chang Tse Wen, on his counterclaim for breach of duty of care. Deutsche Bank's claim against Dr. Chang is dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Deutsche Bank sues Chang for debt; Chang counterclaims misrepresentation and breach of duty. Court finds DB breached duty of care.

1.7 Decision Date

10 December 2012

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Deutsche Bank AG	Plaintiff, Defendant	Corporation	Claim Dismissed	Lost	Ang Cheng Hock, Tan Xeauwei, Ramesh Kumar, Joel Lim
Chang Tse Wen	Defendant, Plaintiff	Individual	Judgment for Plaintiff	Won	K Muralidharan Pillai, Sim Wei Na, Luo Qinghui, Ng Chun Ying

3. Judges

Judge Name	Title	Delivered Judgment
Philip Pillai	Judge	Yes

4. Counsels

Counsel Name	Organization
Ang Cheng Hock	Allen & Gledhill LLP
Tan Xeauwei	Allen & Gledhill LLP
Ramesh Kumar	Allen & Gledhill LLP
Joel Lim	Allen & Gledhill LLP
K Muralidharan Pillai	Rajah & Tann LLP
Sim Wei Na	Rajah & Tann LLP
Luo Qinghui	Rajah & Tann LLP
Ng Chun Ying	Rajah & Tann LLP

4. Facts

Dr. Chang was to receive US$118 million from the sale of his shares in Tanox Inc.
Mr. Wan, Deutsche Bank's relationship manager, knew Dr. Chang was financially inexperienced.
Mr. Wan represented that Deutsche Bank would advise Dr. Chang on managing his new wealth.
Dr. Chang purchased 34 DSPPs concentrated on international bank shares in a short period.
Deutsche Bank extended unsolicited margin trading facilities to Dr. Chang.
Deutsche Bank did not provide adequate risk management advice to Dr. Chang.
Dr. Chang's risk profile was materially changed in Deutsche Bank's internal records without proper justification.

5. Formal Citations

Deutsche Bank AG v Chang Tse Wen, Suit No 731 of 2009/F, [2012] SGHC 248

6. Timeline

Date	Event
2006-12-28	Dr. Chang and Prof. Lim met Mr. Wan at Standard Chartered Bank, Hong Kong.
2007-01-01	Mr. Wan left Standard Chartered Bank, Hong Kong, to join Deutsche Bank.
2007-02-01	Mr. Wan contacted Prof. Lim to arrange a meeting with her and Dr. Chang.
2007-03-15	Mr. Wan met Prof. Lim and Dr. Chang in Taipei to persuade them to open private banking accounts with Deutsche Bank.
2007-08-01	Dr. Chang signed the account application form with Deutsche Bank.
2007-08-30	Dr. Chang deposited approximately US$26 million with Deutsche Bank.
2007-11-19	Dr. Chang purchased a Citigroup Discount Share Purchase Program from Deutsche Bank.
2007-11-23	Dr. Chang signed the Master Agreement for Foreign Exchange Trading and Derivatives Transactions.
2007-11-28	Deutsche Bank unilaterally extended a US$10 million margin financing facility to Dr. Chang.
2007-12-12	Dr. Chang purchased 32 Discount Share Purchase Programs within a span of 23 days.
2007-12-18	Dr. Chang started receiving margin calls from Deutsche Bank.
2008-02-01	Dr. Chang purchased two more Discount Share Purchase Programs.
2008-03-07	Dr. Chang learned from Deutsche Bank that he had an exposure of US$76 million.
2008-11-01	Dr. Chang unwound his open Discount Share Purchase Programs.
2008-11-21	Deutsche Bank exercised its contractual termination and security rights against Dr. Chang’s accumulated shares.
2009-01-01	Deutsche Bank AG filed the original claim against Dr Chang.
2012-12-11	Judgment reserved.

7. Legal Issues

Breach of Duty of Care
- Outcome: The court held that Deutsche Bank breached its duty of care to Dr. Chang by failing to provide adequate advice on managing his new wealth and the risks associated with the DSPP investments.
- Category: Substantive
- Sub-Issues:
  - Failure to advise on risk management
  - Unsuitable investment advice
  - Failure to disclose risks
  - Unsolicited margin financing
- Related Cases:
  - [2007] 4 SLR(R) 100
  - [1995] 2 AC 145
Misrepresentation
- Outcome: The court found that Dr. Chang failed to prove that Deutsche Bank made any false statements of present fact that constituted actionable misrepresentations.
- Category: Substantive
- Sub-Issues:
  - Statements of future intention vs. present fact
  - Sales puffs vs. actionable representations
- Related Cases:
  - [1991] SGHC 27
Fiduciary Duty
- Outcome: The court held that Deutsche Bank did not undertake a fiduciary obligation to Dr. Chang prior to the signing of the account application form.
- Category: Substantive
- Sub-Issues:
  - Undertaking to act in another's interest
  - Commercial relationship vs. fiduciary relationship
- Related Cases:
  - [1998] 1 Ch 1
Evidential and Contractual Estoppel
- Outcome: The court found that Deutsche Bank failed to establish an evidential estoppel and was hesitant to apply the doctrine of contractual estoppel, given Dr. Chang's financial inexperience and Deutsche Bank's pre-contractual undertaking to advise him.
- Category: Procedural
- Sub-Issues:
  - Effect of disclaimer clauses
  - Sophistication of customer
  - Pre-contractual duty of care
- Related Cases:
  - [2007] 3 SLR(R) 566
  - [2012] SGCA 43

8. Remedies Sought

Monetary Damages
Repayment of outstanding debt

9. Cause of Actions

Breach of Duty of Care
Misrepresentation
Breach of Fiduciary Duty

10. Practice Areas

Commercial Litigation
Banking Litigation
Financial Services Litigation
Contract Disputes
Negligence Claims

11. Industries

Financial Services

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Hedley, Byrne & Co Ltd v Heller & Partners Ltd	N/A	Yes	[1964] AC 465	N/A	Cited as authority for the principle of negligent misrepresentation.
Bristol and West Building Society v Mothew	N/A	Yes	[1998] 1 Ch 1	N/A	Cited for the classic definition of a fiduciary.
Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal	Court of Appeal	Yes	[2009] 3 SLR(R) 109	Singapore	Cited with approval for the definition of a fiduciary.
Hospital Products Limited v United States Surgical Corporation And Others	High Court of Australia	Yes	(1984) 156 CLR 41	Australia	Cited for the principle that the categories of fiduciary relationships are not closed.
Governor and Company of the Bank of Scotland v A Ltd and others	N/A	Yes	[2001] 1 WLR 751	N/A	Cited for the rationale behind why courts do not ordinarily consider banks as fiduciaries.
Manchester Trust v Furness	N/A	Yes	[1895] 2 QB 539	N/A	Cited to show the need for certainty in commercial transactions.
Bestland Development Pte Ltd v Thasin Development Pte Ltd	High Court	Yes	[1991] SGHC 27	Singapore	Cited for the principle that a statement must relate to a matter of fact to constitute a representation.
Bank Leumi Le Israel BM v British National Insurance Co Ltd and others	N/A	Yes	[1988] 1 Lloyd’s Rep 71	N/A	Cited for the principle that a statement as to a future fact can carry a representation that the person making the statement has an honest belief.
British Airways Board v Taylor	N/A	Yes	[1976] 1 WLR 13	N/A	Cited to show the dangers of transforming one type of assurance with another.
Tan Chin Seng and others v Raffles Town Club Pte Ltd	Court of Appeal	Yes	[2003] 3 SLR(R) 307	Singapore	Cited for the principle that a misstatement of the state of a man’s mind is a misrepresentation of fact.
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency	Court of Appeal	Yes	[2007] 4 SLR(R) 100	Singapore	Cited for the single test to determine the existence of a duty of care.
Standard Chartered Bank v Ceylon Petroleum Corporation	N/A	Yes	[2011] EWHC 1785 (Comm)	England and Wales	Cited for the importance of a pragmatic approach in considering whether a duty of care arises.
JP Morgan Chase Bank (formerly known as The Chase Manhattan Bank) (a body corporate) and others v Springwell Navigation Corporation	N/A	Yes	[2008] EWHC 1186 (Comm)	England and Wales	Cited for the principle that the factual matrix must be closely examined to determine whether a duty of care indeed arose.
Henderson v Merrett Syndicates Ltd	N/A	Yes	[1995] 2 AC 145	N/A	Cited for the principle that a general duty of care may arise as a concurrent tortious duty co-existing alongside contractual duties.
Go Dante Yap v Bank Austria Creditanstalt AG	N/A	Yes	[2010] 4 SLR 916	Singapore	Cited for the principle that a general duty of care may arise as a concurrent tortious duty co-existing alongside contractual duties.
IFE Fund SA v Goldman Sachs International	N/A	Yes	[2007] 2 Lloyd’s Rep 449	N/A	Cited for the principle that contractual disclaimers effectively exclude a concurrent tortious duty of care between commercially sophisticated parties.
Titan Steel Wheels Ltd v The Royal Bank of Scotland plc	N/A	Yes	[2010] EWHC 211 (Comm)	England and Wales	Cited for the principle that similarly worded disclaimers are only consistent with the conclusion that the parties were agreeing to conduct their dealings on the basis that the bank was not acting as an advisor nor undertaking any duty of care.
E A Grimstead & Son Ltd v Francis Patrick McGarrigan	N/A	Yes	[1999] EWCA Civ 3029	England and Wales	Cited for the principle that an acknowledgement of non-reliance is capable of operating as an evidential estoppel.
Lowe v Lombank Ltd	N/A	Yes	[1960] 1 WLR 196	N/A	Cited for the requirements of evidential estoppel.
Peekay Intermark Ltd & Anor v Australia and New Zealand Banking Group Limited	N/A	Yes	[2006] EWCA Civ 386	England and Wales	Cited for the principle that there is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction.
Colchester Borough Council v Smith	N/A	Yes	[1991] Ch 448	N/A	Cited for the principle that the contract itself gives rise to an estoppel.
Springwell Navigation Corporation v JP Morgan Chase Bank & Ors	N/A	Yes	[2010] EWCA Civ 1221	England and Wales	Cited for the principle that parties could by contract agree on the state of affairs upon which a contract was made.
Orient Centre Investments Ltd and another v Société Générale	Court of Appeal	Yes	[2007] 3 SLR(R) 566	Singapore	Cited for the principle that the combined effect of the express general and specific terms and conditions applicable to the structured products provides an insuperable obstacle to any claim by the plaintiffs against the defendant based on the alleged breach of representations or duties.
Als Memasa and another v UBS AG	Court of Appeal	Yes	[2012] SGCA 43	Singapore	Cited for the principle that it may be desirable for the courts to reconsider whether financial institutions should be entitled to invoke such non-reliance clauses against unsophisticated customers.
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric	Court of Appeal	Yes	[2007] 3 SLR(R) 782	Singapore	Cited for the law governing damages for breach of duty of care.
Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners and another	N/A	Yes	[2008] 1 AC 561	N/A	Cited for the principle that the award of compound interest was no longer restricted to cases involving deceit or equitable fraud.
The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd	N/A	Yes	[2009] 2 SLR(R) 385	Singapore	Cited for the principle that the courts have an unfettered discretion to award simple or compound interest as damages as is appropriate that would justly compensate the person for the loss that he has suffered.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Civil Law Act	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Discount Share Purchase Program
DSPP
Margin Financing
Duty of Care
Misrepresentation
Fiduciary Duty
Private Wealth Management
Relationship Manager
Investment Advice
Risk Management
Evidential Estoppel
Contractual Estoppel

15.2 Keywords

private banking
duty of care
misrepresentation
derivatives
financial advice
Singapore
Deutsche Bank
Chang Tse Wen

16. Subjects

Banking
Finance
Investments
Derivatives
Financial Services

17. Areas of Law

Banking Law
Contract Law
Tort Law
Financial Regulation
Private Banking
Derivatives Law
Civil Procedure