Citing an “abject failure to make proper discovery,” a Singapore appeals court has thrown out a decision favoring a bank over an individual investor in a dispute over $5 million in losses incurred during the global financial crisis.
Teo Wai Cheong had been an investor in a type of structured financial product called an accumulator, which he purchased through a private banker at the Singapore arm of French bank Crédit Industriel et Commercial (CIC).
An investor in an accumulator agrees to buy certain amounts of a security at regular intervals, betting that the contracted “strike price” will remain lower than the market price. However, if the market price drops below the strike price, the investor is required to purchase double the amount of the security, essentially doubling his or her loss.
The bank sued Teo in 2009 for failing to pay for some 20 accumulators he allegedly purchased between July and October 2007 and which produced the losses at issue. Teo claims he never authorized the purchase of those accumulators, and the case has focused on the communications between the investor and his CIC banker, Ng Su Ming.
A trial court ruled against him in 2010, but that decision was vacated and a retrial ordered when it was determined that the bank had not provided full discovery of conversations between Teo and Ng. Last year, a trial court again ruled for CIC, finding that Teo had authorized the purchases.
But, in a decision issued last week, Singapore’s Court of Appeal said the retrial court had improperly admitted earlier testimony by Ng into evidence despite the fact that she could not be located to appear at the second trial.
New evidence that emerged since the first trial, the three-judge panel of Sundaresh Menon, Chao Hick Tin, and V K Rajah determined, cast Ng’s previous testimony into doubt and Teo’s case was impaired by his inability to cross-examine her based on it. The new discovery showed Ng had lied to her own bank’s credit department and appeared to be purposefully using her private mobile phone to talk to Teo instead of an office phone with a recording device.
“The newly disclosed evidence would undoubtedly have been used by Teo’s counsel in his cross-examination of Ng at the First Trial had it been available then,” the judges wrote. “Had Ng not been able to satisfactorily explain these documents, it would have gravely undermined Ng’s testimony and the Bank’s case that the Disputed Accumulators were fully authorised.”
The court said the failure of CIC to produce this evidence in the first trial raised serious questions about how the bank and its lawyers had approached their discovery obligations. Noting two perfunctory emails sent by CIC’s lawyers at WongPartnership to in-house counsel at the bank, the judges wrote: “We would have serious concerns if this was the full extent of the legal advice rendered by the solicitors to the Bank on the question of discovery.”
The judges said they would have expected far more detailed instructions, specifying classes of documents to be produced. “Further, the solicitors would also have been expected to examine what the Bank in fact produced and consider, in this light, what classes of documents seemed to be missing,” the court said.
WongPartnership’s Manoj Sandrasegara, Smitha Menon, and Aw Wen Ni led representation for CIC. The firm did not respond to a request for comment. CIC also did not respond to a request for comment.
Teo was represented by Chelva Rajah SC of Tan Rajah & Cheah and Sean Lim Thian Siong of Hin Tat Augustine & Partners.
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