Case Summaries

IPP Financial Advisers Pte Ltd v Saimee bin Jumaat [2020] SGCA 47


13 May 2020

Case summary

IPP Financial Advisers Pte Ltd v Saimee bin Jumaat [2020] SGCA 47
Civil Appeal Nos 154 and 159 of 2019


Decision of the Court of Appeal (delivered by Steven Chong JA):

Outcome: Court of Appeal allows the appeal by the appellant in Civil Appeal No 154, and allows the appeal by the appellants in Civil Appeal No 159. The respondent’s claims against the appellants are time-barred and must fail.

Background to the appeal

1 IPP Financial Advisers Pte Ltd (“IPP”), the appellant in Civil Appeal No 154 of 2019, is a financial advisory company. The first (“Moi”) and second (“Quek”) appellants in Civil Appeal No 159 of 2019, were the managing partner and financial services consultant respectively at one of the advisory groups at IPP.

2 The respondent (“Saimee”) was the appellants’ client, and Moi and Quek were in charge of his portfolio. Saimee’s evidence was that he “trusted their opinions and advice”, and “took their advice on moving funds around when necessary”.

The SMLG Investment

3 Sometime in January to April 2011, Moi and Quek suggested to Saimee the possibility of investing in the foreign exchange market. Moi and Quek advised him to sell his shares in various companies, and to invest in the foreign exchange market through a trading account with a company known as SMLG Inc (“SMLG”). This is referred to as the “SMLG Investment”. More specifically, the trading account was based on an “algorithm trading system” operated by SMLG, and investors using the SMLG trading system would transfer the desired capital into their online trading account. The trading system would thereafter perform automated trades.

4 Saimee alleged that Moi and Quek made the following representations: (a) within a year from the date of investment, SMLG would pay Saimee the principal amount invested along with a profit of 40%; (b) the SMLG Investment was safe and capital guaranteed; and (c) Moi and Quek had recommended the same to all of their clients.

5 Saimee, on the advice of Moi and Quek, opened a trading account with FX Primus Ltd (“FX Primus”) for the purposes of the SMLG Investment. Moi assisted Saimee in registering with SMLG and opening the online trading account with FX Primus.

6 Thereafter, Saimee transferred a total of US$620,900 into a bank account (held by FX Primus) in Mauritius, in three tranches: (a) US$80,300 on 27 April 2011; (b) US$240,300 on 17 June 2011; and (c) US$300,300 on 3 February 2012.

7 Unbeknownst to Saimee at this point, Moi and Quek had also invested in SMLG, in the amount of US$49,701.12 and US$21,023.84 respectively. They had invested in SMLG prior to recommending the SMLG Investment to Saimee.

8 Sometime in May 2012, after payment for the first tranche of US$80,300 plus profits became due to Saimee, Moi and Quek told Saimee that SMLG was unable to pay due to a “technical glitch”. According to Moi’s evidence, he first knew about the technical glitch in March or April 2012 and it caused “the whole [of Moi’s] account [to] be wiped out”, and Saimee’s and Quek’s account were similarly affected at around the same time. Moi and Quek thereafter told Saimee that SMLG required a loan of US$200,000 before SMLG could begin trading again, so that it could make the repayment to Saimee, and that SMLG would repay the loan within two months. At this point, Moi and Quek also disclosed to Saimee for the first time that they too had invested in SMLG. Hence, according to Moi and Quek, the loan to SMLG was essential to recover all their investments.

9 Thereafter, Saimee gave SMLG the US$200,000 loan. On 17 May 2012, on Moi and Quek’s advice, Saimee signed a “Term Loan Guarantee” with Moi, which, among other things, stated that the US$200,000 loan to SMLG was for a period of two months, starting from 25 April 2012.

10 On 24 June 2012, ie, two months later, the loan was not repaid. From June to September 2012, Saimee continuously asked Moi and Quek for repayment of his moneys, ie, the US$200,000 loan and the SMLG Investment. On 17 September 2012, on Moi and Quek’s advice, Saimee entered into three separate settlement agreements with SMLG (“Settlement Agreements”), which provided that SMLG would pay Saimee US$84,000, US$252,000 and US$375,000 respectively, a total of US$711,000 (“the Settlement Sum”), by 21 September 2012 as the full and final settlement of all claims against SMLG in relation to the SMLG Investment.

11 On 21 September 2012, however, no sums were repaid to Saimee. Thereafter, from November 2012 to December 2013, each time Saimee (repeatedly) asked about the Settlement Sum, Moi would reassure him that it would be paid shortly.

12 On 2 December 2013, Saimee and Moi had a Whatsapp conversation in which Moi again reassured him that his investment would be repaid. In addition, Moi informed Saimee for the first time that the SMLG Investment was not offered by IPP. Prior to this message, and at all material times, it was Saimee’s evidence that he was under the impression that the SMLG Investment was “approved” by IPP. The loan of US$200,000 was eventually repaid – S$50,000 paid on 16 October 2012 and S$240,000 a year later.

13 On 21 July 2018, Saimee filed a writ of summons claiming for the sum of US$711,000 against Moi and Quek on the grounds of fraudulent or negligent misrepresentation, and against IPP on grounds of vicarious liability.

Decision by the Judge below

14 The Judge below allowed Saimee’s claim for US$620,900 against the appellants. The Judge accepted that Moi and Quek owed Saimee a duty of care, had made the representations at [4(a)] and [4(b)] above as alleged by Saimee, that these representations were false, that Saimee had relied on them, and that their breach had resulted in damage to Saimee. Moi and Quek were therefore jointly and severally liable to compensate Saimee the sum of US$620,900 under the tort of negligence. The Judge also found that vicarious liability should be imposed on IPP.

15 For completeness, the Judge dismissed Saimee’s fraudulent misrepresentation claim against Moi and Quek, because the element of fraudulent intention was not established.

16 The Judge further held that Saimee’s claim against Moi and Quek was not time-barred. He held that Saimee’s cause of action accrued at the point when Saimee could say with certainty that he had lost his invested sum of US$620,900. It was only on 21 September 2012, when Saimee did not receive any of the Settlement Sum under the Settlement Agreements, that it could be said with certainty that he suffered actual loss as a result of Moi and Quek’s negligent misrepresentations. Therefore, the Judge held that the latest date that Saimee could have pursued his tortious claim was 21 September 2018. As he had filed his writ on 21 July 2018, his claims were not time-barred.

17 On appeal, IPP, Moi and Quek argued that the claims against them are time-barred.

The Court of Appeal’s decision

18 The Court of Appeal allowed the appeals. Saimee’s cause of action against the appellants accrued on 27 April 2012 when he suffered actual loss of his first tranche of payment. He could claim damages in respect of his full claim of US$620,900 as long as he commenced the action against them by 27 April 2018. Unfortunately, Saimee failed to do so – the writ of summons was filed too late, on 21 July 2018. His claim was accordingly time-barred (at [103] and [106]).

IPP’s reliance on the limitation defence

19 Although the Judge’s finding in respect of the time bar issue only related to Moi and Quek, IPP argues on appeal that it should likewise be allowed to raise the limitation defence. The Court of Appeal held that IPP’s pleadings as regards the time bar defence was adequate, because they adopted the defence, which was specifically pleaded by Moi and Quek, for IPP. Accordingly, the Court of Appeal made no order as to IPP’s application in Summons No 138 of 2018 (ie, IPP’s application to amend its Defence to plead limitation explicitly), as it was unnecessary (at [35]).

Pleadings and the burden of proof

20 The moment a limitation defence is raised by the defendant in pleadings, the plaintiff’s burden is to prove that its claim fell within the limitation period. It is not necessarily sufficient for the plaintiff to prove that the date of accrual of the cause of action is different from the pleaded date of the defence. It also has to prove that the date of accrual is within the limitation period. This is because it is open to the court to find that the cause of action had accrued on a date that is different from that pleaded by the defendant (at [37] and [41]).

21 Section 24A of the Limitation Act applies to all claims in tort, whether or not the tort is a strict-liability tort or a fault-based tort. The relevant provision, s 24A(3)(a), provides for a limitation period of 6 years from the date on which the cause of action accrued. For actions framed in tort which require proof of damage, the cause of action accrues when damage occurs (at [46]).

Due date for payment of the Settlement Sum

22 The Judge held that 21 September 2012 was when the action accrued, because this was when it could be said with certainty that Saimee suffered actual loss as a result of Moi and Quek’s negligent misrepresentations. The Judge also found that Moi and Quek had owed Saimee a continuing duty of care throughout the entire period when the investments were not repaid. The Court of Appeal held that the Judge erred in finding that the action accrued on 21 September 2012. The determination of when loss is caused must necessarily be with reference to the pleaded cause of action. In this case, the pleaded loss would be that caused by Moi and Quek’s negligent misrepresentations regarding the SMLG Investment and not under the Settlement Agreements. Even if Moi and Quek owed a continuing duty to Saimee, it was only relevant if the breach of such a duty caused the loss in question. This was not the case here – the relevant breach of duty already occurred at the time of the negligent misrepresentations. When the Judge said that it could not be said with certainty that Saimee had suffered actual loss until 21 September 2012, the Judge had conflated the recovery of any loss with the existence of the loss. The Judge’s position – that loss is only suffered (and a cause of action only accrues) when it is certain from Saimee’s perspective that loss is caused – was untenable (at [53]–[56]).

23 The law has made provision for a situation when an investor like Saimee only discovers that he has a claim some time after the negligent misrepresentation. In such a situation, he has the option of calculating the limitation period with reference to the date of his discovery except that the limitation period would be three years from the date of discovery instead of the usual six years under s 24A(3)(a). However, even s 24A(3)(b) did not assist Saimee since he would have discovered that some of his SMLG Investment was not repaid on the first anniversary of the first tranche of payment (ie, 27 April 2012). The claim was thus clearly made outside the three-year period under s 24A(3)(b) (at [46], [57]–[59])

Date of default of loan

24 On appeal, Moi and Quek argued that Saimee’s loss occurred on 24 June 2012, because when the US$200,000 loan became due and remained unpaid, Saimee should have known that the SMLG Investment was in jeopardy, or knew that “something was seriously wrong” with it. The Court of Appeal rejected this argument, as Saimee’s knowledge or suspicion of the loss suffered was irrelevant to the inquiry of when loss in fact occurred (at [60]–[61]).

Date the SMLG Investment was entered into

25 The primary argument of Moi, Quek and IPP was that the cause of action accrued the moment the transaction was entered into and three tranches of payment were made – on 27 April 2011, 17 June 2011 and 3 February 2012. There were conflicting cases in various Commonwealth jurisdictions on whether damage can be said to occur at this point, and on whether purely contingent loss constituted loss. In the Court of Appeal’s decision, the only relevant inquiry in this determination for purposes of the present appeals is whether the loss is purely contingent. Purely contingent loss is not in itself damage until the contingency occurred. The mere likelihood that there would be a loss from entering into a transaction does not equate to actual or present loss at the time the transaction was entered into. To compel a plaintiff to institute proceedings before the ascertainable existence of at least some of his loss would be unjust (at [63]–[92]).

26 In the present case, at the time Saimee entered into the SMLG Investment, there was no actual loss incurred. When Saimee paid US$620,900 into FX Primus’ bank account, what he obtained in return was SMLG’s covenant for repayment plus some (unknown) percentage of profits in return, and a risk of losing his investment. What Saimee did not get was security on this investment and an assured profit of 40%, which he thought he had arising from Moi and Quek’s negligent misrepresentations. There was neither any suggestion, whether in the proceedings below or on appeal, that the SMLG Investment was a total sham such that this covenant was worthless from the outset, nor was there any evidence to that effect. Instead, the loss was a contingent loss – Saimee would suffer actual loss if and when certain risks materialised, ie, when SMLG breaches its covenant for repayment. Before that risk materialised, Saimee in fact stood a chance at profiting from his investment, even if this was a chance fraught with risk. The Court of Appeal therefore did not agree that the loss occurred at the time the investments were made (at [95] and [96]).

Date the payments became due

27 Moi and Quek’s final account of when the damage occurred was that the cause of action in respect of each of the three tranches of payment accrued one year after each of them were made (ie, when repayment of the sum plus profits became due) – ie, 27 April 2012, 17 June 2012 and 3 February 2013. Moi and Quek further argued that there were various reasons for moving up the date of accrual of action in respect of the third and/or second tranches, such that the claim in respect of the whole investment sum was time-barred. The Court of Appeal held that Saimee’s cause of action in respect of any and all losses arising from Moi and Quek’s negligent misrepresentations accrued on 27 April 2012. The cause of action in respect of the first, second and third tranches of payment did not accrue separately on 27 April 2012, 17 June 2012 and 17 September 2012 respectively. This was because (a) there was only a single negligent act which is the subject of the action, ie, Moi and Quek’s negligent misrepresentations; and (b) 27 April 2012 was when the negligent misrepresentations first became actionable due to some damage occurring as a result (at [101]–[103]).

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.