Jonathan William Glassberg v UBS AG, SINGAPORE BRANCH

Facts

Mr Jonathan William Glassberg, an experienced broker who co-founded JB Drax Honore, was a private banking client of UBS AG, Singapore Branch. He moved his account there in 2012 when his relationship manager, Mr Stephan Freh, joined the bank, and in 2015 described himself in an investor profile questionnaire as a knowledgeable investor. From around September 2016 he also paid for the bank's Active Portfolio Advisory Service (APA Service), which gave him access to an investment specialist.

On 18 August 2017 Mr Freh emailed him from his UBS address about the Direct Lending Income Fund (DLIF), stating that it was not a UBS recommendation. Mr Glassberg said he never read that email. After later emails and calls with Mr Freh, he invested US$1,000,000 in November 2017 and a further US$1,500,000 in February 2018. Mr Freh left the bank in June 2018. In 2019 withdrawals from the fund were suspended and, following a US Securities and Exchange Commission complaint, allegations of a multi-year fraud involving the fund manager's chief executive came to light. According to Mr Glassberg, his investment is worthless subject to any recovery in the liquidation.

In Suit No 1043 of 2021 he sued the bank for US$2,500,000 in contract, in negligence, and alternatively on the basis that it was vicariously liable for Mr Freh. Wong Li Kok, Alex JC heard the trial.

Issues

1. Whether Mr Freh had actual or ostensible authority to offer the DLIF investment on the bank's behalf
2. Whether the DLIF recommendation fell within the APA Service so that the bank owed contractual duties
3. Whether the bank owed a duty of care in tort and whether its exclusion clauses were unreasonable under the Unfair Contract Terms Act
4. Whether the bank was vicariously liable for Mr Freh's conduct

Holding

The court dismissed Mr Glassberg's claim for damages and interest in full, finding against him on authority, contract, tort, the Unfair Contract Terms Act and vicarious liability. It did not need to decide loss or contributory negligence, and reserved costs.

Reasoning

On authority, Mr Glassberg had accepted on an earlier appeal that DLIF lay outside the bank's product universe, so there was no actual authority. Nor was there ostensible authority. Use of a bank email address mattered less than what the emails said. The August email expressly disclaimed a UBS recommendation, the November email referred back to it, and Mr Freh spoke of DLIF only in the first person. Mr Glassberg should have read the August email.

On contract, the APA Service gave access to separate investment specialists as an added resource. Mr Freh was a client advisor, not an investment specialist, and Mr Glassberg conceded at trial that Mr Freh had not played both roles. Booking the trades in an APA portfolio did not show that the service had been engaged.

On tort, clause 7.1 of the General Terms and Conditions, which said the bank was not obliged to advise and that any advice given carried no responsibility, was an express disclaimer that prevented a duty arising. It was consistent with clause 5.1, which preserves liability for negligently executed instructions. Even if a duty existed, its standard was low given his sophistication and contractual acknowledgements, and it was not breached. On causation, his own evidence showed he would have invested whenever Mr Freh recommended it, and the fraud was a novus actus interveniens. The exclusion clauses were reasonable: his own expert and Mr Glassberg himself accepted they were standard in banking.

On vicarious liability, clause 5.1 extended the bank's exclusions to its employees. In any event, although the relationship test was met, it was not fair, just and reasonable to impose liability under the approach in Ng Huat Seng and another v Munib Mohammad Madni and another [2017] 2 SLR 1074 and Skandinaviska. Mr Glassberg had agreed to make his own decisions and read fund documents, and the bank's controls had worked through the August disclaimer.

From the judgment