Deutsche Bank v Chang: Negligence, Fiduciary Duty & Misrepresentation in Accumulator Investments

Deutsche Bank AG sued Dr. Chang Tse Wen for US$1,788,855.41 related to losses from accumulator investments. Dr. Chang counterclaimed for negligence, breach of fiduciary duty, and misrepresentation. The High Court allowed the negligence counterclaim, awarding Dr. Chang US$49,047,721.12. The Court of Appeal allowed Deutsche Bank's appeal, finding no duty of care existed and reversed the judgment. Dr. Chang's cross-appeal on misrepresentation was dismissed. The Court of Appeal ordered Dr. Chang to pay Deutsche Bank US$1,788,855.41 plus interest.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed in part; judgment for Deutsche Bank for US$1,788,855.41 plus interest; Dr. Chang's counterclaim dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Deutsche Bank sues Dr. Chang for debt; Chang counterclaims negligence, breach of fiduciary duty, and misrepresentation related to accumulator losses. Court of Appeal reverses negligence finding.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Deutsche Bank AGAppellant, RespondentCorporationAppeal allowed in partPartial
Chang Tse WenRespondent, AppellantIndividualCounterclaim dismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Ang Cheng HockAllen & Gledhill LLP
Tan Kai LiangAllen & Gledhill LLP
Tan XeauweiAllen & Gledhill LLP
Joel LimAllen & Gledhill LLP
K. Muralidharan PillaiRajah & Tann LLP
Sim Wei NaRajah & Tann LLP
Ng Chun YingRajah & Tann LLP

4. Facts

  1. Dr. Chang opened an account with Deutsche Bank after meeting Mr. Wan.
  2. Dr. Chang purchased 34 DSPPs, resulting in substantial losses.
  3. Dr. Chang claimed losses due to Deutsche Bank's negligence, breach of fiduciary duty, and misrepresentation.
  4. The High Court initially ruled in favor of Dr. Chang on the negligence claim.
  5. Dr. Chang also purchased DSPPs through another account with Citigroup Smith Barney.
  6. Deutsche Bank issued margin call letters to Dr. Chang.
  7. Dr. Chang signed a service agreement and a master agreement with Deutsche Bank.

5. Formal Citations

  1. Deutsche Bank AG v Chang Tse Wen, Civil Appeals Nos 164 of 2012 and 2 of 2013, [2013] SGCA 49
  2. Deutsche Bank AG v Chang Tse Wen, , [2013] 1 SLR 1310

6. Timeline

DateEvent
Dr. Chang meets Mr. Wan from Standard Chartered Bank in Hong Kong.
Mr. Wan joins Deutsche Bank's Hong Kong operations.
Dr. Chang and Professor Lim meet with Mr. Wan from Deutsche Bank in Taipei.
Dr. Chang seeks advice from Mr. Wan on the sale of his Tanox shares.
Dr. Chang contacts Mr. Wan to sign the account application form.
Dr. Chang signs the account application form with Deutsche Bank.
Dr. Chang deposits approximately US$26m into his Deutsche Bank account.
Dr. Chang purchases first Discounted Share Purchase Program.
Dr. Chang signs the Master Agreement for Foreign Exchange Trading and Derivatives Transactions.
Dr. Chang purchases 672,000 Citigroup shares through other accounts.
Dr. Chang purchases 32 DSPPs.
Augusta Auswin Limited is incorporated in the British Virgin Islands.
Dr. Chang purchases two more DSPPs.
Dr. Chang purchases 32 DSPPs through Augusta Auswin Limited account.
Mr. Wan and Ms. Yan inform Dr. Chang of his total exposure under the DSPPs.
Dr. Chang begins selling shares accumulated under his Deutsche Bank account.
Deutsche Bank exercises contractual termination and security rights.
Deutsche Bank sells Dr. Chang’s accumulated shares.
Deutsche Bank seeks payment of US$1,788,855.41 from Dr. Chang.
Deutsche Bank files Civil Appeal No 164 of 2012.
Dr. Chang files Civil Appeal No 2 of 2013.
Judgment reserved.

7. Legal Issues

  1. Duty of Care
    • Outcome: The Court of Appeal held that Deutsche Bank did not owe Dr. Chang a tortious duty of care in advising him on the management of his wealth.
    • Category: Substantive
    • Sub-Issues:
      • Pre-contractual duty of care
      • Voluntary assumption of responsibility
      • Reliance on advice
  2. Misrepresentation
    • Outcome: The Court of Appeal held that Dr. Chang's counterclaim in misrepresentation was not made out on the facts.
    • Category: Substantive
    • Sub-Issues:
      • Statements of future intention
      • Sales puff
      • Honest belief
  3. Breach of Fiduciary Duty
    • Outcome: The Judge dismissed Dr Chang’s counterclaim in breach of fiduciary duty.
    • Category: Substantive

8. Remedies Sought

  1. Monetary Damages
  2. Rescission of Contract

9. Cause of Actions

  • Negligence
  • Misrepresentation
  • Breach of Fiduciary Duty
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation
  • Wealth Management
  • Financial Services Litigation

11. Industries

  • Financial Services

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Teo Wai Cheong v Crédit Industriel et CommercialCourt of AppealYes[2013] 3 SLR 573SingaporeCited to define the salient features of an accumulator contract for shares.
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology AgencyCourt of AppealYes[2007] 4 SLR(R) 100SingaporeCited for the unified test to determine the existence of a tortious duty of care.
Animal Concerns Research & Education Society v Tan Boon KweeUnknownYes[2011] 2 SLR 146SingaporeCited to elaborate on the second stage of the Spandeck test.
M’Alister (or Donoghue) (Pauper) v StevensonHouse of LordsYes[1932] AC 562United KingdomCited for the salient principles underlying the tort of negligence.
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric (practising under the name and style of W P Architects)UnknownYes[2007] 1 SLR(R) 853SingaporeCited regarding the threshold requirement of factual foreseeability.
JP Morgan Chase Bank (formerly known as The Chase Manhattan Bank) (a body corporate) and others v Springwell Navigation Corporation (a body corporate)High CourtYes[2008] EWHC 1186 (Comm)England and WalesCited for the indicia of an advisory relationship.
Standard Chartered Bank v Ceylon Petroleum CorporationHigh CourtYes[2011] EWHC 1785 (Comm)England and WalesCited for summarizing observations on the indicia of an advisory relationship.
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd and othersPrivy CouncilYes[1986] AC 80United KingdomCited regarding the imposition of tortious duty of care.
Go Dante Yap v Bank Austria Creditanstalt AGCourt of AppealYes[2011] 4 SLR 559SingaporeCited regarding the duty of care in discretionary investment management agreements.
Nitine Jantilal v BNP Paribas Wealth ManagementHigh CourtYes[2012] SGHC 28SingaporeCited regarding the effect of non-reliance clauses on a tortious duty of care.
IFE Fund SA v Goldman Sachs InternationalUnknownYes[2007] 2 Lloyd’s Rep 449UnknownCited regarding non-reliance and non-representation clauses.
Titan Steel Wheels Ltd v Royal Bank of Scotland PlcUnknownYes[2010] 2 Lloyd’s Rep 92UnknownCited regarding non-reliance and non-representation clauses.
Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland PlcUnknownYes[2011] 1 Lloyd’s Rep 123UnknownCited regarding non-reliance and non-representation clauses.
Springwell Navigation Corporation v JP Morgan Chase BankUnknownYes[2010] 2 CLC 705UnknownCited regarding non-reliance and non-representation clauses.
Camerata Property Inc v Credit Suisse Securities (Europe) LtdUnknownYes[2011] 2 BCLC 54UnknownCited regarding non-reliance and non-representation clauses.
Phillips Products Ltd v Hyland and anotherCourt of AppealYes[1987] 1 WLR 659England and WalesCited regarding the effect of contractual terms on excluding liability.
Smith v Eric S BushHouse of LordsYes[1990] 1 AC 831United KingdomCited regarding the effect of non-contractual notices on excluding liability.
Sansom v Metcalfe Hambleton & CoUnknownYes[1998] PNLR 542UnknownCited regarding the standard of care for professionally qualified individuals.
Worboys v Acme Investments LtdUnknownYes[1969] 4 BLR 133UnknownCited regarding the standard of care for professionally qualified individuals.
Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA (formerly known as HSBC Republic Bank (Suisse) SA)UnknownYes[2012] 4 HKC 260Hong KongCited regarding the ability to calculate maximum exposure under a Forward Accumulator.
FoodCo UK LLP (t/a Muffin Break) and others v Henry Boot Developments LimitedHigh CourtYes[2010] EWHC 358 (Ch)England and WalesCited regarding statements of future intention as representations of fact.
Fordy v HarwoodCourt of AppealYes[1999] EWCA Civ 1134England and WalesCited regarding sales puff as a representation of fact.
Easterbrook v HopkinsUnknownYes[1918] NZLR 428New ZealandCited regarding sales puff as a representation of fact.
Deutsche Bank AG v Chang Tse WenHigh CourtYes[2013] 1 SLR 1310SingaporeThe decision from which this appeal arose.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Unfair Contract Terms Act (Cap 396, 1994 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Discounted Share Purchase Program
  • Accumulator
  • Margin Trading
  • Overconcentration Risk
  • Knock-Out Price
  • Multiplying Effect
  • Pre-Contractual Duty of Care
  • Investment Advisory Relationship
  • Execution-Only Account

15.2 Keywords

  • Deutsche Bank
  • Chang Tse Wen
  • Negligence
  • Misrepresentation
  • Fiduciary Duty
  • Accumulator
  • DSPP
  • Duty of Care
  • Singapore
  • Contract Law
  • Tort Law
  • Financial Services

17. Areas of Law

Area NameRelevance Score
Negligence80
Wealth Management75
Banking and Finance70
Contract Law70
Investments65
Misrepresentation60
Financial Products55
Fiduciary Duties50

16. Subjects

  • Banking
  • Finance
  • Investments
  • Wealth Management
  • Financial Derivatives