Tan Chin Yew Joseph v Saxo Capital Markets Pte Ltd  SGHC 274
The Singapore High Court in Tan Chin Yew Joseph v Saxo Capital Markets Pte Ltd considered whether a futures broker had breached an alleged implied obligation to act in a timely and expeditious manner. The court found that there was no discernible gap in the contract to necessitate the implication of a term and that to so imply such a term would directly contradict the terms on which the plaintiff’s trading account with the futures broker was opened.
The plaintiff (“Tan”), a certified financial analyst, opened a trading account with the defendant (“Saxo”), a futures broker which allows its clients to trade on a wide variety of international exchanges using a self-directed trading model. In signing the application form as part of the account opening procedure, Tan acknowledged that Saxo’s General Business Terms (the “GBT”) formed part of the contract governing his relationship with Saxo (the “Contract”).
Tan acquired 36 futures contracts on margin, allowing him to use a small amount of capital to take a large position on the relative price movements in platinum and gold on two US based futures exchanges. Tan was required to ensure his accounts had funds exceeding the total margin requirement through a calculation called the margin utilisation ratio (“MUR”). If the MUR equaled or exceeded 100%, Tan would immediately be subject to a “margin call”, a contractual obligation to reduce his MUR by either depositing more funds into his account or by closing some of his open positions. Although not stated in the GBT, in reality Saxo allowed each client a grace period of 47 hours or until the MUR reached 150%, whichever was sooner, to bring the MUR back to 100% (the “grace period”). Otherwise, the positions would be closed automatically.
On 4 August 2011, due to a rise in his MUR, Tan spoke with a Saxo employee (“Grant”) and was informed of the grace period. Tan’s MUR continued to rise that day and reached 100% that night. He was sent an automated e-mail informing him of this and stating that funds must be made available and booked into the trading account. On 5 August 2011, an employee of Saxo (“Christin”) called Tan to inform him that his MUR had reached 102% and that he was subject to a margin call. Tan informed Christin that he would transfer S$40,000 (the “funds”) to return the MUR to 100%. He declined to close out some of his trading positions. Tan instructed his bank to transfer the funds to Saxo’s bank account and this instruction was completed almost three hours after the conversation with Christin. Saxo’s cash management team did not “sight” the money until 3.09pm and it was not credited to Tan’s account until 3.12pm due to the carrying out of standard anti- money laundering checks. At 3.11pm, Tan’s MUR reached 151% and all his positions were automatically closed.
Tan brought proceedings against Saxo seeking damages on the basis that Saxo had wrongfully closed out his open futures contracts, resulting in a loss of S$214,000 and also a loss of potential profits of S$322,000, which he would have earned if he had held on to his positions.
It was Tan’s position that Saxo should have credited the funds into his trading account as soon as it received the bank’s notification that the bank had received the remittance (the “bank notification”). This argument was based on the premise that there was an implied term in the contract that Saxo would provide its services in a “timely and expeditious manner”. Alternatively, Tan submitted that Saxo owed him a duty of care under the law of tort to the same effect. It was submitted that Saxo was in breach of this duty in not crediting the funds upon receipt of the bank notification which directly resulted in the MUR going above 150%. Tan accepted that Saxo had the right to automatically close the positions pursuant to the GBT but argued that Saxo was estopped from relying on the relevant GBT clauses based on assurances received from Grant and Christin that his position would not be closed out unless his MUR remained above 100% for more than 47 hours or his MUR reached 150%. Tan further argued that Saxo was estopped from relying on the relevant GBT clauses that specified that Saxo may take up to one business day to credit incoming funds because Tan had received an unequivocal promise that he would be entitled to the benefit of the funds as soon as it was credited to the account.
Saxo stated that the terms of the GBT regarding the right to close out positions after the MUR has passed 150% and crediting accounts taking up to one business day presented a complete defence to Tan’s claims. Saxo stated that Tan’s arguments of an implied term and a duty of care in tort are not sustainable in the face of these express provisions of the contract. In any event, Saxo had acted in a timely and expeditious manner in crediting Tan’s account within three minutes and 38 seconds of being notified of their receipt.
The court, applying Sembcorp Marine Ltd v PPL Holdings Pte Ltd & Anor and another appeal  4 SLR 193, disagreed that there was an implied term that Saxo was to provide its services to Tan in a timely and expeditious manner. The court found that there was no discernible gap in the contract to necessitate the implication of a term and that to so imply such a term would directly contradict the GBT clause that it may take up to one business day to credit incoming funds into an account. The court noted that the effect of this clause was that it simply could not be a breach to take up to one business day to credit funds. This clause also gives the contract clear business efficacy without any need to imply an overarching term that Saxo would provide its services in a timely and expeditious manner. The court went on to note that even if such a term could be implied, it was clear on the facts that Saxo still would not be in breach.
The claim as framed in tort was the same as that framed in contract and similarly failed.
Thus, the final argument for the court to consider was whether Saxo was estopped from reliance on the GBT clauses. The doctrine of promissory estoppel is often described as a “shield” as it allows a promisee to prevent a promisor from insisting on enforcing his strict legal rights. A promisee cannot use promissory estoppel as a “sword” to found a free-standing cause of action. The same is true for the doctrine of estoppel by convention. The court noted that Tan had no “sword” as he lacked a sustainable cause of action arising from an implied term in contract of a duty of care in tort for the reasons above and was therefore unable to avail himself of the estoppel doctrine. The court noted that even if Tan was permitted to raise the estoppel arguments as a sword, his claim would still fail as Saxo’s employees at no time provided Tan with a promise, let alone an unequivocal promise.
The court held that Tan’s claim failed completely for the reasons set out above and also noted that Tan was the “author of his own misfortune” in not appreciating the volatility of the market and taking a total of two and a half hours to initiate the transfer of the funds, whereas Saxo made the funds available in three minutes and 38 seconds after the bank notification. The mere fact that Tan’s MUR went above 150% in those three minutes and 38 seconds could not, in itself, mean that Saxo breached its obligations in contract or breached any obligation it might have had in tort.