Glassberg, Jonathan William v UBS AG, Singapore Branch [2022] SGHC 314

Case Details

• Citation: [2022] SGHC 314
• Court: General Division of the High Court of the Republic of Singapore
• Decision Date: 15 December 2022
• Coram: See Kee Oon J
• Case Number: Suit No 1043 of 2021; Registrar’s Appeal No 275 of 2022; HC/SUM 1706/2022
• Hearing Date(s): 10, 13 October 2022
• Claimant / Plaintiff: Jonathan William Glassberg
• Respondent / Defendant: UBS AG, Singapore Branch
• Counsel for Claimant / Respondent: Yu Kexin (Yu Law)
• Counsel for Appellant / Defendant: Teo Chun-Wei Benedict, Lee Wei Alexander, Lim Siyang Lucas (Drew & Napier LLC)
• Practice Areas: Civil Procedure; Striking out; Banking Law; Contractual Interpretation; Tort of Negligence

Summary

The decision in Glassberg, Jonathan William v UBS AG, Singapore Branch [2022] SGHC 314 serves as a critical examination of the "plainly and obviously unsustainable" threshold required for striking out pleadings under Order 18 Rule 19 of the Rules of Court (2014 Rev Ed). The dispute arose from significant financial losses sustained by the plaintiff, Jonathan William Glassberg, following a US$2.5 million investment in the Direct Lending Income Fund (“DLIF”), which subsequently collapsed due to a multi-year fraud perpetrated by its investment manager. The plaintiff sought recovery against UBS AG, Singapore Branch (“UBS”), alleging breaches of contractual duties, implied terms of skill and care, and tortious negligence in the provision of investment advisory and monitoring services.

The central doctrinal conflict involved the interplay between a bank's general terms of service and specialized advisory frameworks—specifically the "UBS Advice Premium – Active Portfolio Advisory Service" (“APA Service”). The High Court was tasked with determining whether the plaintiff’s claims were so factually or legally deficient that they should be terminated before trial. The defendant, UBS, argued that the contractual claims were unsustainable because the DLIF investment fell outside the bank’s "investment universe" and the APA Service had never been formally "engaged" for this specific fund. Furthermore, UBS contended that the tortious claim was doomed because the loss was caused by an external fraud that the bank could not have reasonably detected or prevented.

See Kee Oon J allowed the defendant’s appeal in part, striking out the plaintiff’s claims premised on breach of contract. The court held that the plaintiff had no factually sustainable basis to assert that the APA Service—and the heightened duties in Section II of the Investment Services Terms & Conditions (“Investment T&Cs”)—applied to the DLIF investment. The court found that the DLIF was explicitly treated as being outside the bank’s recommendation list, and the plaintiff’s attempt to bridge this gap through estoppel or implied terms failed to meet the requisite legal standard. This reinforces the principle that where a contract contains clear threshold conditions for the activation of specific services, a plaintiff must plead facts capable of satisfying those conditions to survive a strike-out application.

However, the court affirmed the Assistant Registrar’s decision to allow the tortious claim to proceed. Unlike the contractual claims, which were tethered to the specific definitions and "investment universe" limitations of the Investment T&Cs, the tortious claim involved fact-sensitive inquiries into the standard of care and causation. The court determined that the question of whether UBS’s advice (or lack thereof) caused the plaintiff’s loss, notwithstanding the underlying fraud of the fund manager, was a matter for trial. This distinction highlights the court's reluctance to strike out negligence claims in complex financial disputes where the causal link between advisory failures and investment losses requires a full evidentiary hearing.

Timeline of Events

1. 21 March 2012: The plaintiff initiates the relationship with UBS by signing the Account Opening Form.
2. April 2012: The plaintiff officially opens his account with UBS AG, Singapore Branch.
3. 11 April 2016: The plaintiff signs the "UBS Advice Premium – Active Portfolio Advisory Service" (“APA Service”) Agreement.
4. 20 May 2016: The APA Service is formally activated for the plaintiff's account.
5. 18 August 2017: Mr. Stephan Freh, the plaintiff’s Client Advisor, first introduces the Direct Lending Income Fund (“DLIF”) to the plaintiff via email, attaching a fact sheet.
6. 29 November 2017: The plaintiff makes his first investment in the DLIF, amounting to US$1 million.
7. 23 February 2018: The plaintiff makes a second investment in the DLIF, amounting to US$1.5 million, bringing the total investment to US$2.5 million.
8. May 2018: The plaintiff terminates the APA Service with UBS.
9. 2019: Allegations of a multi-year fraud by the DLIF’s investment advisor (DLI) and its CEO emerge; the US Securities and Exchange Commission (“SEC”) files a complaint, and DLI is placed under liquidation.
10. 23 December 2021: The plaintiff commences Suit No 1043 of 2021 against UBS.
11. 27 January 2022: UBS files Summons No 275 of 2022 (later RA 275) and Summons No 1706 of 2022 to strike out the plaintiff's claim.
12. 5 May 2022: The Assistant Registrar dismisses the defendant's strike-out application (SUM 1706) in its entirety.
13. 10, 13 October 2022: The High Court hears the Registrar’s Appeal (RA 275) against the AR's decision.
14. 15 December 2022: The High Court delivers judgment, allowing the appeal in part and striking out the contract claims.

What Were the Facts of This Case?

The plaintiff, Jonathan William Glassberg, was a private banking client of UBS AG, Singapore Branch. His relationship with the bank was governed by a suite of documents, including the Account Opening Form, the General Terms & Conditions (“General T&Cs”), and the Investment Services Terms & Conditions (“Investment T&Cs”). In September 2016, the plaintiff subscribed to the "UBS Advice Premium – Active Portfolio Advisory Service" (the “APA Service”). This service was marketed as providing "active portfolio monitoring" and "tailored investment advice" delivered by "investment specialists." Crucially, the Investment T&Cs were divided into sections, with Section II specifically governing the APA Service. Clause 1 of Section II stipulated that the section only applied "if and to the extent that the APA Service has been engaged."

The plaintiff’s primary point of contact at UBS was Mr. Stephan Freh, a Client Advisor. Between August 2017 and February 2018, Mr. Freh and the plaintiff engaged in extensive communications regarding the Direct Lending Income Fund (“DLIF”). The DLIF was described in marketing materials as a fund that provided credit to non-bank lenders, purportedly capturing a "regulatory premium" created by the retreat of traditional banks from certain lending sectors. On 18 August 2017, Mr. Freh emailed the DLIF fact sheet to the plaintiff, noting that the fund was "not a UBS recommendation" but was something he personally liked and had invested in himself. Despite the "not a UBS recommendation" caveat, the plaintiff alleged that Mr. Freh continued to provide positive commentary and advice regarding the fund's performance and safety.

Relying on these communications, the plaintiff invested US$1 million in the DLIF on 29 November 2017. Following further discussions with Mr. Freh—which included mentions of the fund's consistent returns and Mr. Freh's own personal stake—the plaintiff invested an additional US$1.5 million on 23 February 2018. The total investment of US$2.5 million was lost when it was revealed in 2019 that the DLIF’s investment manager, Direct Lending Investments LLC (“DLI”), and its CEO had been engaged in a massive fraud involving the manipulation of the fund’s Net Asset Value (“NAV”) and the falsification of loan performance data. The SEC subsequently intervened, and the fund was liquidated, resulting in a total loss for the plaintiff.

The plaintiff’s Statement of Claim alleged that UBS breached its contractual duties under Section II of the Investment T&Cs, specifically Clauses 3.1, 4.1, 4.2, and 11.1. These clauses related to the bank’s obligations to provide investment advice, monitor the portfolio, and notify the client of risks. The plaintiff also pleaded that there was an implied term in the contract requiring UBS to exercise reasonable skill and care. In the alternative, the plaintiff claimed in tort, asserting that UBS owed a duty of care to advise him competently and to conduct adequate due diligence on the DLIF before recommending it or allowing him to invest in it through the bank's platform. UBS sought to strike out these claims, arguing that the DLIF was never part of the "UBS investment universe" and therefore the APA Service obligations never applied to it. UBS further argued that the fraud was the sole cause of the loss, breaking any chain of causation linked to the bank's alleged negligence.

What Were the Key Legal Issues?

The primary legal issue was whether the plaintiff’s claims should be struck out under Order 18 Rule 19(1)(a), (b), (c), or (d) of the Rules of Court (2014 Rev Ed). This required the court to determine if the claims disclosed no reasonable cause of action, were scandalous, frivolous or vexatious, might prejudice or delay the fair trial of the action, or were otherwise an abuse of the process of the court. Within this procedural framework, several substantive sub-issues emerged:

• Contractual Threshold: Whether the APA Service (and thus Section II of the Investment T&Cs) was "engaged" in respect of the DLIF investment, given that the DLIF was outside the bank's "investment universe" and the advice was provided by a Client Advisor rather than an "Investment Specialist."
• Estoppel: Whether UBS was estopped from denying that the APA Service applied to the DLIF investment based on the conduct and representations of Mr. Freh.
• Implied Terms: Whether a term of reasonable skill and care could be implied into the contract to override or supplement the express limitations regarding the "investment universe."
• Tortious Causation: Whether the plaintiff’s tort claim was "plainly and obviously unsustainable" on the basis that the loss was caused by the third-party fraud of DLI, rather than any negligence by UBS.
• Statutory Protection: The potential application of the Unfair Contract Terms Act to the bank's exclusion and limitation clauses.

How Did the Court Analyse the Issues?

The court’s analysis began with the high threshold for striking out. Citing [2020] SGHC 104 and Letchimy d/o Palanisamy Nadasan Majeed v Maha Devi d/o Palanisamy Nadasan [2021] 1 SLR 970, See Kee Oon J emphasized that the power to strike out is a "draconian" one, to be exercised only in "plain and obvious" cases where the claim is "legally or factually unsustainable."

1. The Contractual Claims and the APA Service

The court focused on the "threshold issue" of whether Section II of the Investment T&Cs applied. Clause 1 of Section II was clear: it applied only if the APA Service was "engaged." The defendant argued that for the APA Service to be engaged, two conditions had to be met: (i) the advice must come from an "Investment Specialist" (not just a Client Advisor), and (ii) the investment must be within the "UBS investment universe."

The court found the plaintiff’s position on the "Investment Specialist" requirement to be factually unsustainable. The APA Service agreement explicitly distinguished between Client Advisors (like Mr. Freh) and Investment Specialists. The court noted that the plaintiff’s own pleadings acknowledged that Mr. Freh was his Client Advisor. There was no pleaded fact suggesting that an Investment Specialist had ever been involved in the DLIF investment. Consequently, the specialized duties in Section II, which were predicated on the involvement of Investment Specialists, could not have been triggered.

Regarding the "investment universe," the court observed that the DLIF was consistently described as "not a UBS recommendation." The Investment T&Cs defined the scope of the APA Service as being limited to the bank's "investment universe"—a list of products the bank actively monitored. The court held:

"I was of the view that the plaintiff did not have a factually sustainable claim that the APA Service had been engaged by the plaintiff in respect of his investment in the DLIF." (at [25])

The court rejected the plaintiff's attempt to use the Unfair Contract Terms Act to challenge these definitions, noting that defining the scope of a service is distinct from excluding liability for a service that was actually promised.

2. Estoppel and Implied Terms

The plaintiff argued that UBS was estopped from denying the applicability of the APA Service because Mr. Freh had acted as if he were providing such a service. The court applied the standard for estoppel by representation, requiring a clear and unequivocal representation. It found that Mr. Freh’s express statement that the DLIF was "not a UBS recommendation" was diametrically opposed to a representation that the fund was being monitored under the APA Service. Relying on [2015] SGHC 52, the court held that the plaintiff could not override the clear contractual boundaries through an amorphous plea of estoppel.

Similarly, the court dismissed the argument for an implied term of reasonable skill and care that would expand the bank's duties beyond the "investment universe." The court held that such an implied term would contradict the express terms of the contract which limited the bank's monitoring obligations to a specific set of products. Under Singapore law, an implied term cannot subsist if it is inconsistent with an express term.

3. The Tortious Claim and Causation

The analysis of the tort claim followed a different path. UBS argued that even if it owed a duty of care, the claim should be struck out because the plaintiff could not prove causation. UBS relied on the fact that the loss was caused by a "massive, multi-year fraud" by DLI, which was an external factor. UBS cited Deutsche Bank AG v Chang Tse Wen [2013] 4 SLR 886 to argue that a bank is not generally liable for failing to detect fraud in a third-party fund.

However, the court found that the issue of causation was not "plainly and obviously" unsustainable. The plaintiff’s argument was that if UBS had performed proper due diligence or had not recommended the fund (or allowed it on their platform), the plaintiff would never have invested in the first place. The court noted that in Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184, a bank was held liable for recommending an investment that was unsuitable, even though the loss was triggered by an extraordinary market event (the 2008 financial crisis). See Kee Oon J concluded that whether the fraud "broke the chain of causation" or whether the bank's alleged negligence in recommending the fund was a "proximate cause" of the loss was a complex factual and legal question that required a trial.

What Was the Outcome?

The High Court allowed the defendant’s appeal in part. The operative orders were as follows:

1. The plaintiff’s claims premised on the defendant’s alleged breach of contract (including express and implied terms) were struck out.
2. The defendant’s application to strike out the plaintiff’s claim in tort (negligence) was dismissed, affirming the Assistant Registrar's decision in this regard.
3. The tortious claim was allowed to proceed to trial.

The court's final disposition was captured in the following paragraph:

"For the reasons set out above, I allowed the appeal in part and struck out the plaintiff’s claim in so far as it was premised on the defendant’s breach of contract." (at [65])

Regarding costs, the court noted that both parties had achieved partial success in the appeal—UBS succeeded in striking out the contract claims, while the plaintiff succeeded in preserving the tort claim. Consequently, the court made no order as to costs for the appeal (RA 275), meaning each party would bear its own costs for that stage of the proceedings.

Why Does This Case Matter?

This case is a significant precedent for the Singapore banking and finance sector, particularly regarding the efficacy of "investment universe" clauses and the distinction between contract and tort in strike-out applications. It clarifies that when a bank defines the scope of its advisory services by reference to a specific "universe" of products, that definition acts as a powerful contractual shield. If a client chooses to invest in a "non-recommended" product, they cannot easily invoke the specialized duties associated with premium advisory services, even if their primary Client Advisor provides informal advice or commentary on that product.

For practitioners, the case reinforces the importance of precise pleading. The plaintiff’s failure to plead the involvement of an "Investment Specialist" was fatal to the contract claim because the APA Service was contractually defined by the involvement of such specialists. This underscores that in "practitioner-grade" litigation, the court will hold parties to the literal requirements of their service agreements at the strike-out stage if the documents are unambiguous.

However, the survival of the tort claim is perhaps the most critical takeaway. It signals that banks cannot rely solely on contractual "non-reliance" or "investment universe" clauses to defeat negligence claims at the interlocutory stage. The court’s reliance on Rubenstein v HSBC Bank plc suggests a willingness to look at the "suitability" of advice as a potential cause of loss, even where the immediate trigger for the loss is an external event like fraud. This creates a strategic opening for plaintiffs: even if the contract is tightly drafted to exclude specific duties, the broader tortious duty of care may still provide a pathway to trial.

Finally, the case touches on the limits of the Unfair Contract Terms Act in the banking context. The court’s distinction between "defining the scope of a service" and "excluding liability" is a subtle but vital one. If a clause defines what the bank will do (e.g., monitor only "Universe A"), it is less likely to be viewed as an exclusion clause subject to the reasonableness test under UCTA than a clause that says the bank "is not liable for failures in monitoring."

Practice Pointers

• Contractual Gating: Ensure that premium advisory services (like the APA Service) have clear "gating" conditions. If a service is only "engaged" for specific products or when specific personnel are involved, these conditions should be explicitly stated as conditions precedent to the bank's liability.
• Client Advisor Conduct: Banks must strictly monitor the "informal" advice given by Client Advisors. Mr. Freh’s personal investment and positive commentary on a "non-recommended" fund were enough to keep a tort claim alive, despite the formal "not a UBS recommendation" disclaimer.
• Pleading Specificity: When representing a plaintiff, ensure that the Statement of Claim identifies the specific personnel (e.g., "Investment Specialists") required by the contract to trigger specialized duties. A failure to align the pleaded facts with the contractual definitions can lead to a strike-out.
• Causation Strategy: In tort claims involving third-party fraud, the focus should not be on the bank's failure to detect the fraud, but on the bank's failure to advise on the unsuitability of the investment or the risks inherent in the fund's structure. This "suitability" angle is more likely to survive a strike-out.
• UCTA Application: Distinguish clearly between "basis clauses" (which define the scope of the duty) and "exclusion clauses" (which limit liability for a breach of duty). Basis clauses are generally more robust against UCTA challenges.
• Personal Investment Disclosures: Advisors disclosing personal investments in products they are discussing with clients can be a double-edged sword. While it may show "skin in the game," it can also be interpreted as a powerful, informal recommendation that overrides formal disclaimers in the eyes of a court assessing tortious duty.

Subsequent Treatment

The ratio of this case—that contract claims can be struck out if threshold conditions for specialized services are not met, while tort claims regarding advisory suitability are generally fact-sensitive and trial-worthy—has reinforced the conservative approach to striking out negligence claims in the Singapore High Court. It follows the lineage of Deutsche Bank AG v Chang Tse Wen in emphasizing that the existence and breach of a duty of care in private banking are matters that usually require the "full appreciation of the facts" available only at trial.

Legislation Referenced

• Rules of Court (Cap 322, R 5, 2014 Rev Ed): Order 18 Rule 19(1)(a), (b), (c), and (d); Order 18 Rule 8; Order 41 Rule 5.
• Unfair Contract Terms Act 1977 (2020 Rev Ed): Section 1, Section 2, Section 3, Section 11, and Section 2(2).

Cases Cited

• Applied / Followed:
  • [2020] SGHC 104: Tembusu Growth Fund II Ltd and another v Yee Fook Khong and another (regarding the high threshold for striking out).
  • Letchimy d/o Palanisamy Nadasan Majeed (alias Khadijah Nadasan) v Maha Devi d/o Palanisamy Nadasan [2021] 1 SLR 970 (regarding the "plainly and obviously unsustainable" test).
• Referred to / Considered:
  • [2015] SGHC 52: Koh Kim Teck v Credit Suisse AG, Singapore Branch (regarding contractual estoppel and the effect of non-reliance clauses).
  • Deutsche Bank AG v Chang Tse Wen and another appeal [2013] 4 SLR 886 (regarding the duty of care in private banking and causation).
  • Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712 (regarding the application of UCTA to standard terms).
  • Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184 (regarding causation in the context of unsuitable investment advice).

Source Documents

• Original Judgment (PDF)
• eLitigation Case Summary