QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| QUAH SU-LING
|- and -
|GOLDMAN SACHS INTERNATIONAL
Mr Ben Valentin and Ms Rebecca Loveridge (instructed by White & Case LLP) for the Defendant
Hearing dates: 11th and 12th March 2015
Crown Copyright ©
Mrs Justice Carr :
Introduction and the Parties
a) her net worth and net investible assets were US$50 – US$100million;
b) she had broad exposure to investment in equities and sufficient knowledge (among other things) of investing in equities on SGX;
c) she had two or more years of experience of purchasing securities or borrowing against assets on margin, and sufficient knowledge of that type of activity.
"..15.2 On Demand Loan; Increased Costs
Each Loan will be outstanding from day to day and repayable in the currency or currencies in which it is denominated on demand (such demand to be effective immediately) provided that [GS] shall give you reasonable time in all the circumstances to effect the mechanics of repayment prior to issuing a Close-Out Notice. For the avoidance of doubt, the Close-Out Notice may, in certain circumstances, be given on the same day on which the demand was made…
15.6.1 A Loan is an "on demand" facility, so [GS] can demand immediate repayment of any amount outstanding at any time and for any reason."
a) SG$36,614,280.32; and
secured against the following assets as collateral, in summary, :
a) 31,700,000 shares in Asisasons Capital Ltd ("Asiasons");
b) 3,500,000 shares in Blumont Group Limited ("Blumont");
c) 31,633,000 shares in LionGold;
d) 28,247,376 GSI High Yield Rate Portfolio Fund units;
e) 731,577, 962 GSI Global High Yield Mutual Fund units; and
f) 60,573,320 GSI Global Strategic Income Bond Portfolio units,
(together "the Custody Assets").
The shares in Asiasons, Blumont and Liongold are referred to below as "the Shares".
a) would be applying to vacate the trial and for it to be re-fixed for a date after October 2015;
b) would be applying for permission to serve late expert evidence.
Such an application was filed and served on behalf of Ms Quah on 9th January 2015.
"Pursuant to instructions we have very recently received, we are currently preparing an application for permission to amend the Particulars of Claim very substantially ("the Amendment Application"). The amendments will abandon large parts of our client's case as it presently stands, and will seek substantially to re-plead the claim (and defence to counterclaim). …The Amendment Application will also seek further disclosure of documents from your client.
…we would anticipate that if permission for the amendments is granted, your client would wish to serve further factual and expert evidence.
…we will be proposing that the trial slot be used to determine the Amendment Application.…In the event the Amendment Application is refused, our client has instructed us that she will not proceed further with the action. …"
"The amendments are very substantial and they wholly change the nature of the case. Should the application succeed, it is plain that the trial will have to be adjourned from its current slot, in order to give the Defendant an opportunity to address the new case and to serve further evidence in support. Should the application fail, our client has instructed us that she will withdraw her claims. Accordingly, either way, the full current trial slot will not be required."
Against this background, the matter came before the Court on Ms Quah's application to amend on 11th and 12th March 2015.
The original case and the new case
a) GS "dumped" the Shares on the market from 2nd October 2013. This caused a dramatic fall in their price;
b) GS failed to use reasonable efforts to obtain the best price available for the Shares because it should not have sold the Shares on the SGX at all from 2nd October 2013, or should have ceased any sale of the Shares from 4th October 2013;
c) the only reasonable course of action open to GS in the circumstances was a sale of the Shares by way of private placement. GS should have sold the Shares to a third party purchaser, Vicario Investments, found by Ms Quah;
d) had GS not sold the Shares from 2nd October 2013, the proposed sale to Vicario Investments would have completed and enabled Ms Quah to repay the sum demanded, thereby avoiding the loss caused by selling the Shares from 2nd October 2013.
a) GS acted in breach of Clause 15 in failing to give her a reasonable time to effect the mechanics of payment before issuing a notice of default and termination. A period of 48 hours' notice was required;
b) GS ought to have immediately and aggressively sold the Shares on the SGX from 2nd October 2013 so that the loan was repaid in full before the collapse of the price of the Shares on 4th October 2013; alternatively
c) GS ought to have warned Ms Quah on 2nd October 2013 that the price of the Shares was about to undergo a significant market correction. She alleges that, in those circumstances, she would have immediately given instructions to sell the Shares aggressively on the SGX.
a) further express terms of the contract;
b) a new plea as to the true construction of Clause 15, in particular as to what "a reasonable time in all the circumstances to effect the mechanics of payment" meant. There is also a new plea as to the circumstances in which a close-out notice can be given on the same day as a demand;
c) statutory duties owed by GS under section 138(D)(2) of the Financial Services and Market Act 2000 ("FSMA") and the Conduct of Business Sourcebook ("COBS") rules, said to be imported into the contract either by force of law by that section or by clause 1.5 of GS' General Terms and Conditions;
d) new facts as to what GS is said to have known or believed about the imminent crash of the prices of the Shares, but did not tell Ms Quah, immediately prior to the making of the demand and the issuing of the default notice and close-out notice. Ms Quah states that the core of the complaint is that given (i) the fact that the concerns about the Shares had been escalated to senior management in New York (ii) the sudden and unexpected nature of the instruction given by Mr Lane to Mr Moo, (iii) the circumstances and timing of that instruction (at 2.30 am); (iv) Mr Lane's decision and instruction to Mr Moo to call in Ms Quah's loan and start liquidating her entire position immediately, and (v) the fact that, on the information that they had, GS Singapore personnel had not made such a decision themselves, but had had it imposed on them from New York, it is to be inferred that GS was in possession of critical information about Asiasons, Blumont and LionGold which would show or suggest (a) not only that the market value of the companies was too high but that it was so over-valued that if a market correction were to occur it would leave GS seriously exposed to losses, and (b) that such a market correction was or was likely to be imminent, such that there was an urgent need to sell the shares in the companies immediately;
e) a plea that had she known the relevant facts, Ms Quah would not have sought to delay the sales of the Shares but on the contrary, she would not have feared that GS would have dumped her shares and taken steps to prevent dumping, but would have actively encouraged or initiated an immediate and urgent liquidation of as many shares as possible based on an aggressive selling strategy (consistent with maintaining the price in the market) as soon as possible before the imminent market correction that GS feared could occur. That would have produced sales proceeds in excess of SG$40 million instead of the SG$7 million that was in fact achieved by GS ;
f) new allegations of breach of contract, namely :
i) breach of clause 15.2 of GS' General Terms and Conditions by :
failing to give Ms Quah reasonable time to effect the mechanics of payment before issuing a default notice and close-out notice. The period should have been 48 hours, and on any view 1 hour 42 minutes was not reasonable. The notices were not contractually compliant and therefore invalid and the sales carried out in breach of contract;
issuing a notice of default and termination on the same day as the demand notice;
ii) breach of clause 5.4 and Part E of GS' General Terms and Conditions by failing to warn or advise Ms Quah of their information and belief as to the true values of the Companies and their imminent collapse and failing to take all reasonable steps to obtain the best possible result for her on realisation in the light of those concerns;
iii) breach of clause 4.4 and 4.6 of GS' General Terms and Conditions by specifically failing to sell any shares in LionGold or in Blumont at all on 2nd and 3rd October 2013;
g) allegations of breach of statutory duty, namely under COBS, in failing to act fairly and professionally in Ms Quah's best interests, failing to take reasonable steps to ensure that its recommendations or her trade decisions were suitable for her, and failing to warn her that based on the information GS had, that the service was no longer appropriate for her, and in particular by failing to tell her what it knew, failing to take all reasonable steps to get the best prices and failing to sell any shares in Blumont or LionGold at all on 2nd and 3rd October 2013;
h) new pleas of loss and damage flowing from these breaches, namely loss of sales proceeds of either S$49,883,445 or S$38,882,995 depending on what participation rates for what shares would have been used;
i) new claims for relief, namely damages representing the difference between the realised value of the shares and the value of the shares had either of the selling strategies which GS should have adopted been adopted, in the sum of either SG$28,286,392, or SG$17,285,942. These exceed the amount of GS' counterclaim.
Principles to be applied
a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;
b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;
c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;
d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;
e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;
f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;
g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.
Reasons for lateness and delay
a) the new case arises from disclosure and witness statements served on behalf of GS;
b) she has been under tremendous strain from other proceedings and from having been under investigation by the Commercial Affairs Department of the Singapore Police Force, ("the CAD") with the result that she was not in the right state of mind to monitor the progress of the claim;
c) lack of funding at some stage around the summer of 2014 to some stage around late December 2014.
a) there is no proper explanation as to why Ms Quah did not instruct an expert at the outset or at any time before her funding difficulties are said to have arisen, in circumstances when she knew that the viability of (at least central parts of) the original case depended on expert evidence;
b) Ms Quah is careful to say that there was no detailed review with her solicitors until after the pre-trial review. But she is coy about the actual scope of the review before that. She does not go so far as to suggest that GS' witness statements were not reviewed at all on exchange. GS' five witness statements are not long or difficult to follow. She chooses not to explain when and what review was carried out. It appears that both she and/or her solicitors must have reviewed GS' witness statements, not least since they wrote on 6th November 2014 explaining the decision not to serve expert evidence by express reference to "the scope of the evidence available";
c) she gives no proper particulars of the timeline between obtaining funding "in late December 2014" and 10th February 2015. This is a significant omission in circumstances where there was a pre-trial review on 16th January 2015. Given that, on her own case, Ms Quah was in funds in late December 2014 and there was a pre-trial review fixed for 16th January 2015, there is no proper explanation as to why Ms Quah was not in a position to have reviewed her case in detail with her solicitors before 16th January 2015. The situation was one of the utmost urgency.
"27. …This was compounded by the state of my financial resources which had been drained significantly as a result of the multitude of margin calls and legal proceedings. In the light of these issues I was unable to instruct my solicitors to conduct a detailed review of the documents disclosed by the Defendant.
28. I was however able to at least work with my lawyers to file the witness statements…However, thereafter I realised that I no longer had sufficient funds to engage an expert to give evidence in support of my claim and properly pursue this claim to the end. At that stage I was prepared to just give up….
29….Due to the lack of funds I was also not in a position to discuss the Defendant's expert report with my own expert since I could not appoint one and had not done so.
30. Fortunately, sometime late December 2014, I managed to secure funding to pursue my claims against the Defendant…"
Strength of the new case
a) the new case on the construction of Clause 15;
b) the new case on liquidation of the Shares, including on causation.
"The next question which arises is whether sufficient time for compliance with that demand had been allowed before the receiver was appointed? I take as my starting point that well known dictum of Black J in Brighty v Norton (1862) 3 B & S 305, 312:
"I agree that a debtor who is required to pay money on demand, or at a stated time, must have it ready, and is not entitled to further time in order to look for it."
This extremely strict view of the matter was refined by Lord Cockburn C.J in Toms v Wilson (1862) 4 B & S 442, 453, where he said:
"We are all of opinion that the rule should be made absolute. By the terms of the bill of sale, the plaintiff was under an obligation to pay this money immediately upon demand in writing, and if he did not then the defendants were entitled to take possession of and sell the goods. Here such a demand was made. The deed must receive a reasonable construction, and it could not have meant that the plaintiff was bound to pay the money in the very next instant of time after the demand, but he must have a reasonable time to get it from some convenient place. For instance, he might require time to get it from his desk, or to go across the street, or to his bankers for it."
That quotation was endorsed by Sir Barnes Peacock in the Privy Council in Moore v Shelley (1883) 8 App. Cas. 285, 293. These passages were cited, approved and applied by Goff J. in R.A Cripps & Son Ltd v Wickenden  1 W.L.R. 944. The interval of time in that case was approximately one hour, and the judge said that the plaintiffs could not object on the ground that they were not given time to find the money, or that the interval was too short…
English law, therefore, in my judgment, has definitely adopted the mechanics of payment test."
"What that time is must, in my view, depend on the circumstances of the case. If the sum demanded is of an amount which the debtor, if he has it, will be likely to have in a bank account – which will be the position in 99 cases out of 100 – the time permitted must be reasonable in all the circumstances to enable the debtor to contact his bank and make the necessary arrangements for the sum in question to be transferred from his bank to the creditor. If the demand is made out of banking hours, the period of time is likely to be longer – involving waiting until banks reopen – than if the demand is made during banking hours. In so stating I do not consider that I am abandoning the mechanics of payment test in favour of some wider and less precise approach. In his unreported decision in Hawtin, referred to in Panessar's case, Walton J himself said that the debtor is not in default in making payment 'unless and until he has had a reasonable opportunity of implementing whatever reasonable mechanics of payment he may need to employ to discharge the debt'. This, I venture to suggest, is no more than the application of practical common sense…
The requirement that sufficient time be permitted to elapse to enable the debtor to effect the mechanics of payment assumes that that is the period needed if the debtor has the necessary moneys available. If, however, he has made it clear to the creditor that the necessary moneys are not available, then, provided a proper demand has been made, I cannot see that the creditor need allow any time to elapse before being at liberty to treat the debtor as in default…"
"Subject : GS Margin Call Policy
As requested, please find below additional information of our firm's current policy with regards to margin call issuance : (Note : these are subject to changes in accordance with market conditions)
Time to meet calls : 48 hours (T + 2) or unless negative equity, due within 24 hours (T + 1)…"
a) the fact that the proposed amendments raise a totally different and inconsistent case to the original case is relevant background. It heightens the need for careful scrutiny of the merits of the new case;
b) Ms Quah's evidence given for the purpose of the original case does present credibility hurdles for her on the new case, in particular where causation is concerned. On the new case, Ms Quah says that she would have acted radically differently had she known about what she says were GS' concerns and so not have feared "dumping" but, on the contrary, actively have encouraged it. But it is an uphill task for her to establish this to the necessary standard when, as a matter of fact and as set out in her witness statement for the purpose of the original case, she held out doggedly to prevent the sale of the Shares on the SGX and pushed, even beyond 4th October 2013, for refinancing by sale to a third party. This was in circumstances where her financial position was critical and the technical difficulties in re-financing were or were becoming apparent.
a) there were concerns with GS in Singapore on Friday 27th September 2013 as to the suitability of the Shares for margin purposes based on the view that the prices of the Shares were trading at multiples that seemed extreme;
b) but at this stage there was no sense of urgency. A conference call was arranged for the following Monday 30th September 2013 and then again for 1st October 2013;
c) in the evening of 1st October 2013 Mr Tan speaks by telephone with Mr Chan. There is discussion about Blumont having its margins switched off, but no real threat of Liongold and Asiasons being treated in similar fashion;
d) in the evening of 1st October 2013 GS emailed Ms Quah asking if she wished to take up her right in the Blumont shares rights issue or to subscribe for more. She indicated that she wished to redeem them;
e) at 0230 hours (Singapore time) "out of the blue" Mr Lane telephones Mr Moo from New York and indicates that GS should not be lending against (any of) the Shares and instructs Mr Moo to move the risk off GS' books, to make a demand and to start selling the next morning. Mr Moo was unaware before this that the matter had been escalated to New York. He then telephoned Mr Tan (at about 0300 hours Singapore time). Mr Tan then sent the email at 0556 hours (Singapore time) referred to above;
f) Mr Moo telephones Mr Chan at 0845 hours (Singapore time) and tells him that committee and credit control have come back with an analysis that none of the Shares are marginable;
g) Mr Lane and Mr Moo speak again by telephone in the evening of 2nd October 2013. Mr Lane made it clear that he wanted GS to have eliminated its risk in relation to the Shares. Mr Moo states that he did not understand this to mean selling enough stocks in the market to clear the debt. This would not have been achievable while maintaining orderly selling. The expectation was that Ms Quah would have raised funds using alternative means, such as using the Shares as collateral. But Ms Quah does not accept this evidence as credible (by reference to a near contemporaneous email from Mr Moo to Messrs Lee, Tan and Sondhi timed at 1958 hours on 2nd October 2013).
Striking the balance