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Singapore – Disclaimer Provisions No Longer Provide Full Immunity.

11 November, 2013

 

Legal News & Analysis – Asia Pacific – Singapore – Regulatory & Compliance

 

There have been two recent court decisions in Singapore which have brought into question the extent to which financial institutions are able to rely upon disclaimer provisions found in their standard form terms and conditions. They indicate a potential shift in the courts’ approach to disclaimer provisions of this kind.


The first is a decision of the Court of Appeal in the case of Als Memasa v UBS AG which arose out of a claim brought against UBS following the loss of a USD 3.8 million investment in Russian Bonds. The case involved an appeal from the lower courts decision to strike out the claim which involved, amongst other things, the question of whether the non-reliance disclaimer provisions prevented the claimant from relying upon alleged misrepresentations by the bank in order to pursue his claim.


The Court of Appeal ruled that the claim should not be struck out and that the case should be heard. The decision was based on various grounds. However, of note, the Court of Appeal made the point that, when re-hearing the case, the courts would need to consider two specific issues.

 

  • Whether such non-reliance clauses are subject to the Unfair Contract Terms Act. That Act only permits terms which restrict liability if they can be demonstrated to be reasonable
  • Whether the courts should consider moving away from the common law principle in contract that a party is generally bound by his signature even if he is unaware of the existence or effect of some particular term. The court noted that the starting position is that a party is not bound only if he can successfully establish the defence of non est factum, i.e. although he signed the agreement, his mind did not go with his signature, for example because he was mentally incapacitated or he was misled into signing it. Save for those exceptions, linguistic illiteracy is a disability not a privilege

It is worth quoting the judge as it gives an insight in to the courts’ attitude in Singapore to these developing trends:


“… in the light of the many allegations made against financial institutions for “mis-selling” complex financial products to linguistically and financially illiterate and unwary customers during the financial crisis in 2008, it may be desirable for the courts to reconsider whether financial institutions should be accorded full immunity for such “misconduct” by relying on nonreliance clauses which unsophisticated customers might have been induced or persuaded to sign without truly understanding their potential legal effect on any form of misconduct or negligence on the part of the relevant officers in relation to the investment recommended by them”


These comments were subsequently referred to by the High Court in the case of Deutsche Bank v Chang Tsw Wen, a case in which the Court held, on the facts, the disclaimer language did not operate to negate the bank’s pre-contractual duty of care. The case was fact specific, with the bank’s failure to bring the disclaimers to the claimant’s attention seemingly being determinative, but the outcome also appeared to be influenced by the Court of Appeal’s comments in Als Memasa. This decision was appealed.


Stop press: At the time of going to print, the Court of Appeal had just overturned the High Court’s decision in the Deutsche Bank case. That was on the basis that no duty of care had been made out. The Court of Appeal therefore did not need to consider the disclaimer issue. However, whilst not ruling definitively on the point, the Court of Appeal did observe that non-reliance and non-representation clauses may be caught by the Unfair Contract Terms Act.

 

Clyde & Co

 

For further information, please contact:

 

Ian Roberts, Partner, Clyde & Co
[email protected]

 

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