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Indonesia – How Should A Plaintiff Plead A Case If He Cannot Remember Material Facts?

20 January, 2015

 


A plaintiff who does not remember material facts but suspects that he has suffered a wrong faces a dilemma. If he stops short of making positive assertions of fact to establish his claim, and candidly acknowledges his suspicion and the infirmities of his memory, he risks having his case struck out. If he is dishonest and is prepared to assert in his pleadings facts which he knows are not true, he would have committed perjury even though his case may proceed to trial. This difficult issue was considered in the recent High Court decision of Chandra Winata Lie v Citibank NA [2014] SGHC 259, which is reportedly going on appeal to the Court of Appeal.

 
Facts

 
The plaintiff (“the Customer”) was a high net worth individual residing in Indonesia who opened, maintained and operated three investment accounts with the defendant (“the Bank”). All three of the Customer’s accounts were advisory accounts, which meant that the Bank required the Customer’s specific authority, whether oral or otherwise, to enter into a transaction on any of the accounts.

 
The Bank’s practice in dealing with the Customer was to obtain his oral authority to transact on his behalf and to follow up by sending him two documents – a tailored investment proposal and a trade confirmation – either shortly before or shortly after executing the transaction he had authorised. The Customer was expected to countersign and return the trade confirmation to the Bank. However, it was common ground that neither the absence of a trade confirmation for a particular transaction or the Customer’s failure to countersign a trade confirmation for a particular transaction suggested that the Bank had no authority to transact on the Customer’s behalf.

 
Between May 2007 and October 2008, the Customer’s accounts saw significant activity in fairly sophisticated derivatives transactions in foreign exchange and equities, which entailed substantial potential liability for the Customer. As a result of the financial crisis of 2008/2009, the Customer’s accounts sustained significant losses on transactions entered into in or after March 2008.

 
Subsequently, the Customer engaged an expert with a view to commencing suit against the Defendant to recover compensation for his losses. An issue arose over whether the Customer had authorised 14 transactions, which the Customer’s expert discovered could not be matched to any trade confirmation. The Customer requested the Bank to disclose the relevant trade confirmations and other supporting documents for these transactions, as he asserted that he did not remember authorising them. However, the Bank refused to do so and the Customer applied to the High Court for pre-action discovery of the Bank’s internal documents regarding these transactions. The Customer’s application failed as it was held that whether he had authorised the 14 transactions or not was a matter within his own knowledge. Hence, the documents that he sought were not necessary for him to know whether he had a claim against the Bank for unauthorised trading.

 
The Customer then commenced a suit against the Bank, claiming that it was liable to compensate him for his losses on the primary basis that the Bank had breached a duty of care in tort or a contractual duty by failing to advise him of the risks of his investments and by making negligent misrepresentations. In the alternative, the Customer claimed that the Bank had entered into certain transactions without his authority (“the Unauthorised Trading Claim”).

 
Before the Assistant Registrar (“the AR”), the Bank argued that the Customer’s entire Unauthorised Trading Claim ought to be struck out as he had failed to plead an essential element of his cause of action, namely, that he did not authorise the relevant transactions. Moreover, the Customer had advanced alternative claims which rested on inconsistent positions as to whether he had authorised the relevant transactions, which was a matter within his own knowledge.

 
Although the AR permitted the Customer to amend his statement of claim to address the above-mentioned deficiencies, the AR agreed with the Bank’s submission that the amended statement of claim was still fundamentally flawed as the relevant trade confirmations were not material to whether the Bank had the Customer’s authority to transact on its behalf. The AR therefore disallowed the Unauthorised Trading Claim entirely. 

 
Summary Of Decision

 
On appeal, the High Court affirmed the AR’s order and held that:

 

  • it was the Customer’s burden to plead, particularise and prove the Unauthorised Trading Claim;
  • the Customer’s amended statement of claim was not a proper claim for unauthorised trading as the Customer did not assert as a fact that he did not authorise the relevant transactions and was in any event precluded from making any such assertion as it was inconsistent with his own version of the facts; and
  • the Customer was not permitted to attempt to run two inconsistent alternative cases.

 

Failure Of Memory Does Not Relieve Customer’s Burden

 
The core of the Customer’s Unauthorised Trading Claim was found in paragraph 71 of his original statement of claim, which stated to the effect that various surrounding circumstances “[gave] rise to the inference that the [Bank] … breached the terms of the parties’ contract … in engaging in unauthorised transactions as particularised at …”.

 
The High Court found that the Customer’s pleading was defective as it did not assert that he did not authorise those transactions. Also, the surrounding circumstances, which included the fact that the Bank deviated from its usual practice of issuing trade confirmations and procuring the Customer’s countersignature on them, did not have any rational connection to whether the Bank was authorised to transact on the Customer’s behalf. The Customer’s subsequent amendments to his original statement of claim did not cure these defects.

 
Importantly, the High Court observed that although the Customer’s case was that he was unable to positively assert that he did not authorise the relevant transactions because he could not recollect whether he did so, this reason was irrelevant.

 
This was because a plaintiff’s failure of memory, even assuming that it is genuine, does not relieve him of the burden to plead, particularise and prove every essential element of his claim. The authorities indicated that where the plaintiff was unable to plead, particularise and prove his claim, it was an abuse of process for him to commence suit even if:

 

  • the essential elements of his claim were entirely unknowable;
  • they were knowable but were never within his knowledge; or
  • he once knew them but is unable to recollect them.

 
The High Court held that the Customer’s claim amounted to “nothing more than saying that he will contend at trial that there has been unauthorised trading unless the [Bank] produces evidence to the contrary”, which was a “wholly illegitimate reversal of the burden of proof”.

 

 

Conclusion

 
The High Court acknowledged that the rules of pleading, though resting on a sound foundation, might “operate harshly against a plaintiff who is genuinely unable to recall an essential element of his cause of action”. However, it observed that this concern could be addressed by refining the law on pre-action discovery to accommodate a plaintiff who once knew but now cannot remember the information comprised in the documents sought.

 
It is hoped that the Court of Appeal will provide detailed guidance on how a plaintiff should plead a case if he cannot remember material facts.

 

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For further information, please contact:

 

Eugene Quah, Partner, RHTLaw Taylor Wessing
eugene.quah@rhtlawtaylorwessing.com

 
Felicia Ang, RHTLaw Taylor Wessing
felicia.ang@rhtlawtaylorwessing.com

 

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