Case Details
- Citation: [2025] SGHC 4
- Court: General Division of the High Court of the Republic of Singapore
- Decision Date: 10 January 2025
- Coram: Wong Li Kok, Alex JC
- Case Number: Suit No 1043 of 2021
- Hearing Date(s): 9, 10, 13, 15, 16, 28–30 May 2024, 25 September 2024
- Claimant / Plaintiff: Glassberg, Jonathan William
- Respondent / Defendant: UBS AG, Singapore Branch
- Counsel for Plaintiff: Tham Lijing (Tham Lijing LLC, Duxton Hill Chambers (Singapore Group Practice)) (instructed), Yu Kexin (Yu Law)
- Counsel for Defendant: Teo Chun-Wei Benedict, Tham Feei Sy and Lim Siyang Lucas (Drew & Napier LLC)
- Practice Areas: Banking Law; Agency; Contract; Tort; Vicarious Liability
Summary
The judgment in Glassberg, Jonathan William v UBS AG, Singapore Branch [2025] SGHC 4 addresses the complex boundaries of liability within the private banking sector, specifically concerning the unauthorized recommendation of third-party fraudulent investments by a relationship manager ("RM"). The Plaintiff, a sophisticated and high-net-worth investor, sought to hold the Defendant bank liable for the loss of US$2,500,000 invested in the Direct Lending Income Fund ("DLIF"). This fund was later revealed to be a vehicle for a massive fraud orchestrated by its investment manager, Direct Lending Investments LLC ("DLI"), leading to the total loss of the Plaintiff's principal. The Plaintiff’s claim was predicated on several legal fronts: that the RM acted with actual or ostensible authority, that the bank breached contractual and tortious duties of care, and that the bank was vicariously liable for the RM’s conduct.
The Court’s decision represents a significant affirmation of the "contractual primacy" principle in Singapore banking law. Wong Li Kok, Alex JC dismissed the claim in its entirety, finding that the RM, Mr. Freh, lacked both actual and ostensible authority to offer the DLIF as a UBS-sanctioned investment. Crucially, the Court highlighted that the RM had explicitly informed the Plaintiff that the DLIF was not a "UBS recommendation," thereby severing the link of ostensible authority. The judgment meticulously parses the "Advice Premium" service subscribed to by the Plaintiff, concluding that while the bank provided advisory services, the ultimate investment discretion and risk remained with the client, as reinforced by robust contractual disclaimers and exclusion clauses.
Furthermore, the Court held that the bank did not owe a tortious duty of care that could circumvent the clear contractual allocation of risk. Even if such a duty existed, the standard of care for a bank in these circumstances was deemed low, and the intervening fraud of the third-party fund manager constituted a novus actus interveniens that broke the chain of causation. The decision also provides a rigorous application of the Unfair Contract Terms Act, ruling that the bank's exclusion clauses were reasonable given the sophistication of the parties and the nature of private banking services. This case serves as a stern reminder to practitioners and high-net-worth individuals that the protective umbrella of a bank’s liability does not extend to "off-platform" investments recommended by RMs acting outside their mandate.
Ultimately, the judgment reinforces the legal protections afforded to financial institutions through well-drafted terms and conditions. It clarifies that an RM’s personal recommendation, even when delivered via corporate channels, does not automatically bind the institution if the client is put on notice that the recommendation is personal or external. For the Singapore legal landscape, this case deepens the jurisprudence on vicarious liability in the financial sector, applying the two-stage test from Ng Huat Seng to distinguish between employment-related conduct and independent fraudulent schemes.
Timeline of Events
- 21 March 2012: The Plaintiff signs the Defendant’s Account Opening Form, formally establishing the private banking relationship.
- 15 October 2015: Significant date in the relationship history, likely involving the transition of the Plaintiff's portfolio management or specific service subscriptions.
- 18 August 2017: Mr. Freh sends an e-mail from his UBS address to the Plaintiff regarding the Direct Lending Income Fund (DLIF), stating it is not a "UBS recommendation."
- 9 October 2017: The Plaintiff initiates the first tranche of investment into the DLIF.
- 3 November 2017: Subsequent investment activity or communication regarding the DLIF portfolio.
- 29 November 2017: Further investment tranche or administrative processing of the DLIF subscription.
- 20 February 2018: Continued investment activity; the Plaintiff increases exposure to the DLIF.
- 23 February 2018: Processing of additional funds into the DLIF structure.
- 4 May 2018: Final recorded investment activity or communication before the RM's departure.
- June 2018: Mr. Freh leaves the Defendant’s employment.
- 14 February 2019: The fraud involving DLI and the DLIF begins to surface, involving the US Securities and Exchange Commission (SEC).
- 24 February 2023: The Appellate Division delivers a decision in AD/CA 93/2022 regarding a striking out appeal in the same matter.
- 9 May 2024: Commencement of the substantive trial in the General Division of the High Court.
- 25 September 2024: Conclusion of the substantive hearings.
- 10 January 2025: Delivery of the final judgment dismissing the Plaintiff's claims.
What Were the Facts of This Case?
The Plaintiff, Mr. Jonathan William Glassberg, was a highly successful broker and a sophisticated investor who maintained a private banking relationship with the Defendant, UBS AG (Singapore Branch). The relationship began in 2012 when the Plaintiff moved his accounts from JP Morgan to UBS, following his relationship manager, Mr. Freh. Over the course of their relationship, the Plaintiff invested substantial sums, including approximately £15,600,000, across various financial instruments. The Plaintiff was not a novice; his professional background and the scale of his investments categorized him as an "Accredited Investor" under Singapore law.
In 2016, the Plaintiff subscribed to the Defendant’s "Advice Premium - Active Portfolio Advisory Service." This service was designed to provide the Plaintiff with proactive investment advice, portfolio monitoring, and access to UBS’s research and investment specialists. Under this arrangement, the Defendant was to provide "diligent and careful" investment advice. However, the contractual terms explicitly stated that the Plaintiff retained the final decision-making authority for all trades and that the Defendant did not guarantee the performance or accuracy of third-party investments.
The crux of the dispute arose in August 2017. Mr. Freh, acting as the Plaintiff’s RM, introduced him to the Direct Lending Income Fund (DLIF). The DLIF was an external fund managed by Direct Lending Investments LLC (DLI), a US-based entity. On 18 August 2017, Mr. Freh sent an e-mail to the Plaintiff from his official UBS e-mail address. Crucially, the e-mail contained a disclaimer: "This is not a UBS recommendation and I am only showing this to you as you had asked for something with a higher yield." Despite this warning, the Plaintiff proceeded to invest a total of US$2,500,000 in the DLIF in several tranches between October 2017 and May 2018. These investments were made "off-platform," meaning the funds were transferred from the Plaintiff’s UBS account to an external account to subscribe to the DLIF, rather than being held within the UBS custody system.
In early 2019, it was revealed that the DLIF was a fraudulent scheme. The US Securities and Exchange Commission (SEC) initiated an investigation into DLI and its principal, Brendan Ross, alleging that they had overvalued the fund’s assets and falsified performance data. The fund was placed into receivership, and the Plaintiff’s investment of US$2,500,000 was effectively lost. The Plaintiff subsequently commenced Suit No 1043 of 2021, alleging that UBS was liable for the loss. He argued that Mr. Freh had recommended the fund in his capacity as a UBS employee, that UBS had failed to conduct proper due diligence on the DLIF, and that the bank had breached its duty to provide "careful and diligent" advice under the Advice Premium service.
The Defendant’s position was that it had no involvement in the DLIF investment. It contended that the DLIF was never on its "Approved List" of investments and that Mr. Freh had no authority to recommend it. The Defendant relied heavily on the 18 August 2017 e-mail and the various disclaimers in the Account Opening Form and Investment T&Cs, which stated that the bank was not responsible for investments made outside its approved platform or for the fraudulent acts of third parties. The Defendant also pointed to the Plaintiff’s own experience as a broker, arguing that he should have recognized the risks associated with a high-yield, off-platform investment that was explicitly disclaimed by his RM.
The evidentiary record included testimony from the Plaintiff’s expert, Ms. Effie Konstantine Datson, who spoke to banking standards. However, the Court found that the expert's testimony did not override the specific contractual arrangements between the parties. The procedural history also noted a prior attempt to strike out the claim, which was partially successful but allowed the core issues of authority and duty of care to proceed to trial.
What Were the Key Legal Issues?
The Court identified six primary issues that required resolution to determine the Defendant's liability:
- Issue 1: Authority — Whether Mr. Freh had actual or ostensible authority to offer the DLIF as an investment to the Plaintiff on behalf of the Defendant. This involved an analysis of whether the bank had "held out" Mr. Freh as having such authority or if the Plaintiff’s reliance was reasonable.
- Issue 2: Contractual Obligations — Whether the Defendant owed contractual obligations to the Plaintiff under the Investment T&Cs and the "Advice Premium" service to provide diligent and careful advice regarding the DLIF.
- Issue 3: Tortious Duty of Care — Whether the Defendant owed a tortious duty of care to the Plaintiff in providing investment advice, and if so, whether that duty was breached. This required the application of the Spandeck test within a banking context.
- Issue 4: UCTA Reasonableness — Whether the exclusion clauses relied upon by the Defendant were "unreasonable" within the meaning of Section 11(1) of the Unfair Contract Terms Act.
- Issue 5: Vicarious Liability — Whether the Defendant was vicariously liable for Mr. Freh’s conduct under the two-stage test established in Ng Huat Seng.
- Issue 6: Loss and Contributory Negligence — The scope of the Plaintiff’s recoverable loss and whether any award should be reduced due to the Plaintiff’s own negligence in failing to investigate the DLIF.
How Did the Court Analyse the Issues?
Issue 1: Actual or Ostensible Authority
The Court first addressed whether Mr. Freh had the authority to bind the bank in recommending the DLIF. Actual authority was quickly dismissed as the Defendant’s internal policies strictly prohibited RMs from recommending products not on the "Approved List." The DLIF was never on this list. Regarding ostensible authority, the Court applied the principles from EFG Bank AG, Singapore Branch v Surewin Worldwide Limited and others [2022] 5 SLR 915, noting that ostensible authority requires a representation by the principal to the counterparty that the agent has authority, and reliance by the counterparty on that representation.
The Court found that the Defendant had not made any representation that Mr. Freh was authorized to recommend off-platform, non-approved products. Crucially, the e-mail of 18 August 2017, where Mr. Freh stated, "This is not a UBS recommendation," was fatal to the Plaintiff’s claim. The Court reasoned that even if the bank had generally held out Mr. Freh as its agent for investment advice, this specific disclaimer put the Plaintiff on notice that Mr. Freh was acting outside his UBS mandate for this particular transaction. The Court observed at [30] that ostensible authority cannot exist where the third party knows or ought to know of the agent’s lack of authority.
Issue 2: Contractual Obligations
The Plaintiff argued that the "Advice Premium" service created a positive obligation on the bank to advise him against the DLIF or to conduct due diligence. The Court rejected this, emphasizing the "Investment T&Cs" which stipulated that the bank’s advice was based on information available to it and did not constitute a guarantee. The Court held that the contractual framework was designed to facilitate the Plaintiff’s own decision-making. Since the DLIF was an off-platform investment, it fell outside the scope of the "Active Portfolio Advisory Service," which was intended for products held within the UBS ecosystem. The Court found that the bank’s contractual duty to provide "diligent and careful" advice did not extend to vetting every external investment an RM might mention in a personal capacity.
Issue 3: Tortious Duty of Care
In analyzing the tortious duty of care, the Court referred to [2017] SGHC 93 and Zillion Global and another v Deutsche Bank AG, Singapore Branch [2020] 4 SLR 425. While acknowledging that a duty of care can arise in wealth management relationships, the Court held that such a duty must be viewed through the lens of the contractual matrix. At [76], the Court stated:
"I find that the defendant does not owe a tortious duty of care to the plaintiff. Even if a duty was owed, the defendant did not breach this duty as the standard of care was a low one. Further, even if there was a breach of duty, the fraud in DLIF broke the chain of causation."
The Court reasoned that the Plaintiff, as a sophisticated investor, did not rely on the bank to the extent that would create a proximity sufficient for a duty of care regarding off-platform investments. The "low standard of care" mentioned by the Court reflected the bank's role as an advisor to an experienced professional who retained ultimate control.
Issue 4: Unfair Contract Terms Act (UCTA)
The Plaintiff challenged the bank’s exclusion clauses as being unreasonable under the Unfair Contract Terms Act. The Court applied the reasonableness test under Section 11(1), considering the bargaining power of the parties. It found that the Plaintiff was a high-net-worth individual with significant financial experience. The clauses were standard in the private banking industry and were necessary to manage the bank's risk exposure to third-party products. The Court concluded that it was not unreasonable for a bank to exclude liability for investments it did not approve or control, especially when the client was explicitly told the investment was not a bank recommendation.
Issue 5: Vicarious Liability
The Court applied the two-stage test from Ng Huat Seng and another v Munib Mohammad Madni and another [2017] 2 SLR 1074. The first stage (close relationship) was satisfied as Mr. Freh was an employee. However, the second stage (sufficient connection) was not. The Court found that Mr. Freh’s recommendation of the DLIF was not sufficiently connected to his authorized duties. He was acting on a "frolic of his own" by promoting a fraudulent external fund while expressly disclaiming the bank’s endorsement. Furthermore, the Court held that the fraud committed by DLI was a novus actus interveniens. Citing Robinson v West Yorkshire Chief Constable [2018] AC 736, the Court agreed that the criminal acts of a third party (DLI) broke any causal link between the bank’s alleged negligence and the Plaintiff’s loss.
What Was the Outcome?
The Court dismissed the Plaintiff’s claim in its entirety. The Defendant was found not to be liable under any of the pleaded heads of claim—agency, contract, tort, or vicarious liability. The Court’s final order was concise and definitive regarding the merits of the case.
The operative paragraph of the judgment states:
"96. The plaintiff’s claim for damages and interest fails."
Regarding the specific tranches of the US$2,500,000 investment, the Court found that the Plaintiff bore the full risk of these losses. No declarations or injunctions were granted in favor of the Plaintiff. The Court also addressed the issue of costs, following the standard principle that costs follow the event. However, the specific quantum of costs was not determined in the judgment, with the Court stating at [97]: "I will hear the parties on costs."
The dismissal of the claim meant that the Plaintiff was not entitled to any recovery of the principal sum, nor any interest that would have accrued. The judgment effectively closed the door on the Plaintiff's attempt to shift the burden of a third-party fraud onto his financial service provider, reinforcing the boundaries of institutional liability in the face of "off-platform" transactions.
Why Does This Case Matter?
The Glassberg decision is a landmark for the Singapore private banking sector, providing a clear roadmap for how courts will treat "off-platform" investment losses. Its significance lies in several key areas of legal doctrine and practice.
First, it reinforces the primacy of the e-mail disclaimer. In an era where relationship managers often communicate via various digital channels, the Court’s reliance on the single sentence—"This is not a UBS recommendation"—demonstrates that clear, contemporaneous disclaimers can effectively insulate a bank from ostensible authority claims. This provides a powerful defense for banks whose employees might occasionally stray into personal advice or mention external products.
Second, the judgment clarifies the scope of "Advice Premium" services. The Court made a sharp distinction between a bank’s duty to monitor a client’s internal portfolio and its lack of duty toward external investments. For practitioners, this means that the "duty to advise" is not a wandering obligation that follows a client into every transaction they undertake; it is tethered to the assets and products specifically managed or approved by the bank. This protects financial institutions from being "involuntary insurers" for every investment their clients make.
Third, the application of the novus actus interveniens doctrine to third-party fraud is particularly robust in this case. By citing Robinson v West Yorkshire Chief Constable, the Court has signaled that even if a bank were found negligent in its supervision or advice, the deliberate, criminal fraud of a third-party fund manager will likely be viewed as the true cause of loss, breaking the chain of causation. This is a critical shield for banks in an increasingly complex global investment landscape where fraud is a persistent risk.
Fourth, the case provides a modern application of UCTA in the context of sophisticated investors. It confirms that for "Accredited Investors," the threshold for proving a clause is "unreasonable" is very high. The Court accepted that banks must be allowed to limit their liability for products they do not control, and that sophisticated clients are expected to understand and accept these risks when they sign standard-form contracts.
Finally, the decision on vicarious liability limits the "sufficient connection" test. It suggests that when an employee acts in direct contravention of internal policies and issues a disclaimer of the employer's involvement, the employer will not be held liable for the employee's "frolic." This provides clarity on the limits of the Ng Huat Seng test in the financial services industry, where the line between professional service and personal recommendation can sometimes blur.
Practice Pointers
- For Bank Counsel: Ensure that Relationship Managers are strictly trained to use standardized disclaimers when discussing any product not on the bank's Approved List. The phrase "This is not a [Bank Name] recommendation" proved to be the most critical piece of evidence in this case.
- For Transactional Lawyers: When drafting Investment T&Cs, explicitly define the boundaries of "advisory services." Ensure that the contract clearly states that the bank's duty of care does not extend to "off-platform" or third-party investments not held in the bank's custody.
- For Litigation Practitioners: When pleading ostensible authority, be aware that any evidence of the client's knowledge of the agent's lack of authority (such as a disclaimer e-mail) will likely be fatal to the claim. The "sophistication" of the client is a major factor in determining the reasonableness of their reliance.
- For Compliance Officers: Monitor RM communications for mentions of external funds. Even if a disclaimer is used, the repeated recommendation of off-platform products by an RM could still create regulatory risks, even if civil liability is avoided.
- For High-Net-Worth Clients: This case serves as a warning that "Accredited Investor" status carries significant legal weight. Courts will expect such individuals to conduct their own due diligence on high-yield external funds and will not easily allow them to shift losses to their banks.
- Regarding UCTA: Standard exclusion clauses in private banking contracts are likely to be upheld against sophisticated investors. Do not rely on UCTA to strike down clauses that exclude liability for third-party fraud or off-platform investments.
Subsequent Treatment
As a decision delivered in January 2025, Glassberg v UBS is a recent addition to Singapore’s banking jurisprudence. It follows the established trajectory of cases like Tradewaves Ltd v Standard Chartered Bank and Ng Huat Seng, reinforcing a pro-contractual approach in disputes between banks and sophisticated investors. It is expected to be frequently cited in future "rogue RM" cases and disputes involving the scope of advisory duties in private banking. The decision's emphasis on the novus actus interveniens of third-party fraud provides a strong precedent for defendants in similar investment loss claims.
Legislation Referenced
- Unfair Contract Terms Act (2020 Rev Ed), Section 11(1), Section 2(2)
- Financial Services and Markets Act 2000 (UK) (referenced in context of Conduct of Business Rules)
Cases Cited
- Applied: EFG Bank AG, Singapore Branch v Surewin Worldwide limited and others [2022] 5 SLR 915
- Considered: Tradewaves Ltd and others v Standard Chartered Bank and another suit [2017] SGHC 93
- Considered: Saimee bin Jumaat v IPP Financial Advisors Pte Ltd and others [2019] SGHC 159
- Followed: Ng Huat Seng and another v Munib Mohammad Madni and another [2017] 2 SLR 1074
- Referred to: Zillion Global and another v Deutsche Bank AG, Singapore Branch [2020] 4 SLR 425
- Referred to: Go Dante Yap v Bank Austria Creditanstalt AG [2011] 4 SLR 559
- Referred to: Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2011] 3 SLR 540
- Referred to: Robinson v West Yorkshire Chief Constable [2018] AC 736