[2010] 2 SLR Part 00-cases.

book Page 896 Monday, June 21, 2010 2:31 PM

896 SINGAPORE LAW REPORTS [2010] 2 SLR

Lam Chi Kin David

v
Deutsche Bank AG
[2010] SGHC 50

High Court — Suit No 834 of 2008

Steven Chong JC
30 November; 1, 2, 23 December 2009; 10 February 2010
Contract — Breach — Whether defendant was contractually required to give one-day
notice to plaintiff before making margin call — Whether defendant failed to provide
one-day notice to plaintiff — Whether defendant in breach of contract
Equity — Estoppel — Promissory estoppel — Elements of promissory estoppel —
Whether plaintiff had acted in detrimental reliance on defendant’s promise to provide
him with 48-hour grace period to respond to margin calls

Facts
In November 2007, the plaintiff opened two accounts with the defendant,
namely a Private Wealth Management Account (“Advisory Account”) which
held the plaintiff’s deposits and loans in various foreign currencies and a Foreign
Exchange (“FX”) Gem Account which provided a platform for the plaintiff to
trade in FX options. In the Advisory Account, the plaintiff was active in FX
trades, particularly in “Carry Trade Investment Strategy”. Under this strategy, an
investor would typically borrow currencies which offer low interest rates and
convert them into other currencies which offer higher deposit interest rates. In
this way, the investor would make a profit from the difference in the interest
rates.
The plaintiff’s Advisory Account with the defendant was healthy until early
October 2008 when the exchange rates started to move against him which
resulted in an account shortfall. This meant that the Collateral Value assigned to
the plaintiff’s deposits (which is less than the actual market value of the deposits)
fell below the market value of the plaintiff’s liabilities. The Advisory Account
entered into an account shortfall of around United States Dollars
(“USD”) 610,000 on 7 October 2008. On 10 October 2008, the account shortfall
deteriorated to around USD5,460,370.02 which placed the Advisory Account
into “negative equity”. This meant that the mark to the market value of the
plaintiff’s liabilities exceeded the market value of his assets under the Advisory
Account. The plaintiff was duly appraised of the account shortfall at all material
times. The plaintiff informed the defendant that he was unable to or unwilling to
deliver additional collateral to clear the shortfall. On 10 October 2008, the
defendant liquidated all of the plaintiff’s FX positions by executing the margin
call transactions. However, as the Advisory Account was in “negative equity”,
the proceeds were not sufficient to cover the plaintiff’s liabilities. A sum of
USD1,135,239.43 remained due and owing to the defendant.
The plaintiff commenced a claim against the defendant to recover the losses he
suffered from the margin call transactions. The action was initially commenced
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 897

with several pleaded causes of action. However, on the first day of the trial, the
plaintiff obtained leave to amend his pleadings and also abandoned all his
pleaded causes of action except for the remaining claim for wrongful closure of
his FX positions. Essentially, the plaintiff alleged that the defendant made a
wrong margin call on 10 October 2008 when it required him to clear the margin
shortfall within the same day of the notice. This was because the defendant was
entitled to 48 hours to respond to a margin call as promised by the defendant
and/or he was entitled to at least one business day notice to deliver the additional
collateral as stipulated under cl 2.6 of the Master Agreement. The defendant, in
turn, counterclaimed for the sum of USD1,135,239.43.

Held, dismissing the plaintiff’s claim and allowing the defendant’s counterclaim:
(1) The plaintiff’s claim failed irrespective of whether cl 2.6 of the Master
Agreement or the 48-hour grace period was applicable. The defendant had made
a valid margin call on 7 October 2008 when the plaintiff was informed that his
account was in margin shortfall of USD610,000. Therefore even if either or both
the 48-hour grace period or cl 2.6 had applied, the margin call transactions made
at 8.00pm on 10 October 2008 would have been validly made in any event:
at [24].
(2) The Master Agreement was applicable to the transactions in the Advisory
Account. However, cl 2.6 was not designed to give the plaintiff time before the
defendant could close the FX positions when the account was in margin
shortfall. Instead, cl 2.6 conferred a right on the defendant to require the plaintiff
to deliver additional collateral in such an amount if the defendant so required.
The one business day notice only came into play if the defendant decided to
invoke cl 2.6 and not otherwise: at [36].
(3) None of the margin calls were governed by cl 2.6 of the Master
Agreement. Even if cl 2.6 was applicable, there was no breach of the clause by the
defendant since the plaintiff had categorically informed the defendant in no
uncertain terms that he was unwilling and/or unable to deliver additional
collateral: at [41] and [47].
(4) The principle of promissory estoppel applied in circumstances when it
was inequitable for a promisor to resile from his promise and enforce his strict
legal rights where the promisee had acted in detrimental reliance of the promise,
either in the narrower or broader sense of “detriment”. The narrow sense of
“detriment” meant that a promisee had already suffered the “detriment” in
reliance on the promise. The broader sense of detriment was when the promisee
would only suffer the detriment if the promisor was permitted to resile from his
promise: at [56] and [57].
(5) The defendant did in fact promise to provide the plaintiff a 48-hour grace
period to respond to margin calls. However, there was no detrimental reliance
by the plaintiff. The reliance had to be linked to the “detriment”. In the present
case, there was an obvious disconnect between the pleaded reliance and the
alleged detriment. Additionally, it could not be inequitable for the defendant to
enforce its strict legal rights given the plaintiff’s own evidence that he was
unwilling and/or unable to do so even if the grace period was extended to
72 hours: at [62], [65], [67] and [69].
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898 SINGAPORE LAW REPORTS [2010] 2 SLR

Case(s) referred to
Abdul Jalil bin Ahmad bin Talib v A Formation Construction Pte Ltd [2006]
4 SLR(R) 778; [2006] 4 SLR 778 (refd)
Abdul Jalil bin Ahmad bin Talib v A Formation Construction Pte Ltd [2007]
3 SLR(R) 592; [2007] 3 SLR 592 (refd)
Britestone Pte Ltd v Smith & Associates Far East, Ltd [2007] 4 SLR(R) 855; [2007]
4 SLR 855 (folld)
Browne v Dunn (1893) 6 R 67 (folld)
Fenner v Blake [1900] 1 QB 426 (refd)
Fu Loong Lithographer Pte Ltd v Mun Hean Realty Pte Ltd [1989] 1 SLR(R) 194;
[1989] SLR 300 (refd)
Hartley v Hymans [1920] 3 KB 475 (refd)
Teng Ah Kow v Ho Sek Chiu [1993] 3 SLR(R) 43; [1993] 3 SLR 769 (folld)
Thomas Hughes v The Directors of the Metropolitan Railway Co (1877) 2 App
Cas 439 (folld)
United Overseas Bank Ltd v Bank of China [2006] 1 SLR(R) 57; [2006] 1 SLR 57
(refd)
W J Alan & Co Ltd v El Nasr Export & Import Co [1972] 2 QB 189 (refd)
Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd [2009]
2 SLR(R) 532; [2009] 2 SLR 532 (refd)

Christopher Chong and Jasmine Kok (M Pillay) for the plaintiff;

Ang Cheng Hock SC, Paul Ong and Goh Zhuo Neng (Allen & Gledhill LLP) for the
defendant.

10 February 2010 Judgment reserved.

Steven Chong JC:

Introduction
1 In his opening statement, the plaintiff interestingly characterised his
claim as a case about “an investor, his fair-weather bank and the bank’s
broken promises”. However, as the trial progressed, it became clear that the
case by the investor was merely an attempt to transfer the losses which he
had suffered as a result of market movements onto the bank. The plaintiff
amended his case several times as to where the fault of the bank lay and was
still undecided how to run the case until the trial began.
2 Essentially, the plaintiff alleged that the defendant made a wrong
margin call on 10 October 2008 when it required him to clear the margin
shortfall within the same day of the notice. The action was initially
commenced with several pleaded causes of action. However, on the first day
of the trial, the plaintiff obtained leave before me to amend his pleadings. At
the same time, he abandoned all his pleaded causes of action except for the
remaining claim for wrongful closure of his FX positions. It was the
plaintiff’s original pleaded case (prior to the amendment on the first day of
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 899

trial) that by reason of his margin shortfall, the defendant was entitled to
and ought to have closed his account three days earlier, on 7 October 2008.
In spite of his amendment, the plaintiff confirmed both in his affidavit of
evidence-in-chief (“AEIC”) as well as on the witness stand under cross-
examination, that the defendant was indeed entitled to close his account on
7 October 2008. In these circumstances, can the plaintiff maintain a claim
against the defendant for wrongfully closing his account on 10 October
2008 when it is his own evidence that the defendant’s right to do so had
accrued on 7 October 2008? Was this more than a “margin of error” by the
plaintiff in bringing a claim against the defendant for allegedly making a
wrong margin call?

Background facts
3 The plaintiff started his career as a lawyer. He was a sophisticated and
successful investor and by 1994, he had retired from his law practice after
having amassed a fortune in excess of United States Dollars (“USD”) 70m
from his investments. In the account opening form, the plaintiff described
himself as a “professional investor”. He came across to the defendant as an
“extremely savvy and knowledgeable client who knows precisely what he
wants”. He even gave the defendant instructions on specific times for
communication purposes.
4 In November 2007, the plaintiff opened two separate accounts with
the defendant, namely a Private Wealth Management Account (“Advisory
Account”) which held the plaintiff’s deposits and loans in various foreign
currencies and a Foreign Exchange (“FX”) Gem Account which provided a
platform for the plaintiff to trade in FX options. Chin Mei Lin (“Cynthia
Chin”) was the relationship manager of the defendant servicing the plaintiff
from January 2008.
5 In the Advisory Account, the plaintiff was active in FX trades,
particularly in “Carry Trade Investment Strategy”. Under this strategy, an
investor would typically borrow currencies which offer low interest rates
and convert them into other currencies which offer higher deposit interest
rates. In this way, the investor would make a profit from the difference in
the interest rates. This strategy is of course subject to the inherent risks of
currency fluctuations which could be to the benefit or detriment of the
investor. Early in the relationship, the defendant had warned the plaintiff of
the risks of over exposure to Carry Trades.
6 The plaintiff moved his deposits from accounts he held with the other
banks to the Advisory Account. By 11 September 2008, the plaintiff had
remitted a total of New Zealand Dollars (“NZD”) 120,101,937.38 and
USD3,040,000 to his Advisory Account with the defendant. A total of
Japanese Yen (“JPY”) 4,168,423,696 and Swiss Francs
(“CHF”) 36,027,548.42 in loans were transferred from the plaintiff’s
accounts with Overseas Chinese Banking Corporation and BNP Paribas
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900 SINGAPORE LAW REPORTS [2010] 2 SLR

Private Bank respectively to the defendant. The plaintiff’s deposits and

loans in foreign currencies under the Advisory Account are collectively
referred to herein as “FX positions”.

7 The plaintiff’s Advisory Account with the defendant was healthy until
early October 2008 when the exchange rates started to move against him
which resulted in a margin shortfall. The Advisory Account entered into an
“account shortfall” of around USD610,000 on 7 October 2008. This meant
that the Collateral Value assigned to the plaintiff’s deposits (which is less
than the actual market value of the deposits) fell below the market value of
the plaintiff’s liabilities. The term “account shortfall” was used
interchangeably with “margin shortfall” by the parties. “Collateral Value” is
the value of the plaintiff’s collateral as determined by the defendant. “Total
Exposure” is the total sum of the plaintiff’s liabilities under all the facilities
extended to the plaintiff by the defendant. The margin shortfall
deteriorated to around USD2.3m on 8 October 2008 and later in the same
day to around USD4m. While there was a margin shortfall, the account was
still in “positive equity” which meant that the mark to market value of the
plaintiff’s liabilities was less than the market value of his assets. On
10 October 2008, the margin shortfall deteriorated to around
USD5,460,370.02 which placed the Advisory Account into “negative
equity”. This meant that the mark to the market value of the plaintiff’s
liabilities exceeded the market value of his assets under the Advisory
Account. The plaintiff was duly appraised of the margin shortfall at all
material times.

8 The plaintiff informed the defendant that he was unable to/or

unwilling to deliver additional collateral to clear the margin shortfall. On
10 October 2008, the defendant liquidated the plaintiff’s FX positions by
executing the following margin call transactions:

(a) NZD42,251,287.42 sold at a rate of 58.34 for JPY2,464,940,108

(b) NZD40,690,522.37 sold at a rate of 58.34 for JPY2,373,885,075

(c) NZD5,079,561.11 sold at a rate of 58.65 for JPY297,916,259

(d) USD177,471.46 sold at a rate of 98.87 for JPY17,546,603

(e) USD1,135,239.43 sold at a rate of 98.80 for JPY112,161,656

As the Advisory Account was in “negative equity”, the proceeds from the
above transactions were not sufficient to cover the plaintiff’s liabilities. On
13 October 2008, the defendant wrote to the plaintiff claiming that a sum of
USD1,135,239.43 remained outstanding from the plaintiff after the
execution of the margin call transactions and requested for payment of this
sum. The plaintiff did not respond to this request for payment at all.
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 901

Amendments to the plaintiff’s claims

9 On 11 November 2008, the plaintiff commenced the present action
against the defendant to recover the losses he suffered following the margin
call transactions:
(a) First, the plaintiff claimed that he had instructed Cynthia Chin
on or about 23 September 2008 to proceed with a conversion of
NZD50m to USD at a then favourable rate of 0.6920. However, the
defendant allegedly failed to proceed with the plaintiff’s instructions.
As a result, the plaintiff suffered an alleged shortfall of
USD5,460,370.02 between the Collateral Value provided to the
defendant and the plaintiff’s Total Exposure in his Advisory Account.
(b) Secondly, the plaintiff also alleged that the defendant had
wrongfully closed out his FX positions in breach of the notice
requirement under the defendant’s terms and conditions as well as
the grace period which was purportedly promised to him. He claimed
that the margin call was only made on 10 October 2008 when the
defendant required him to clear his margin shortfall within the same
day even though he was entitled to one clear business day under the
defendant’s terms and conditions (cl 2.6 of the Master Agreement)
and/or to a 48-hour grace period as promised. The plaintiff informed
the defendant that he was unable and/or unwilling to remit additional
collateral to clear the shortfall. Accordingly, the defendant closed out
the plaintiff’s FX positions at the close of 10 October 2008 which
resulted in the loss of all his deposits with the defendant (estimated to
be in excess of NZD30m) and a further sum of USD1,135,239.43 due
and owing to the defendant which forms the subject matter of the
defendant’s counterclaim.
(c) Thirdly, the plaintiff alleged that the defendant, in breach of its
duty of care, provided an inaccurate or unreliable computation of the
margin shortfall in its letter dated 10 October 2008.
10 Subsequently, on 24 February 2009, the plaintiff amended his
statement of claim. The plaintiff added details to his claim that Cynthia
Chin had failed to respond to his instructions on 23 September 2008.
According to the plaintiff, on 23 September 2008, he had sent an e-mail to
Cynthia Chin on a NZD transaction he wanted to carry out. He wanted to
convert NZD to USD in light of the general downward trend of the NZD at
that time. He issued an instruction to convert NZD10m to USD if the rate
of 0.6933 could be reached. Cynthia Chin failed to respond and the
NZD/USD rate deteriorated throughout the day on 23 September 2008. The
plaintiff claimed that in view of the defendant’s expertise and resources to
monitor the currency market, the defendant had a duty to advise the
plaintiff that it was impractical or imprudent to hold on to the NZD/USD
dollar order at the rate of 0.6933.
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902 SINGAPORE LAW REPORTS [2010] 2 SLR

11 The plaintiff also included an additional ground against the

defendant. The plaintiff alleged that upon the margin shortfall on 7 October
2008, the defendant was entitled to and ought to have closed the plaintiff’s
Advisory Account so as to limit his liabilities to the defendant. Additionally,
since the plaintiff was a customer with very substantial cash deposits with
the defendant, the defendant had an implied duty to monitor and manage
the plaintiff’s Advisory Account properly and to act to mitigate the
potential loss to the plaintiff. The plaintiff, however, deleted his claim based
on cl 2.6 of the Master Agreement though the claim under the 48-hour
grace period was retained.

12 Subsequently, the plaintiff decided to revive his claim based on cl 2.6

of the Master Agreement once again and on 1 December 2009 after having
obtained leave before me , the plaintiff filed Statement of Claim
(Amendment No 2). The plaintiff deleted his claim based on the
defendant’s failure to close the plaintiff’s Advisory Account on 7 October
2008 to limit his liability to the defendant and relied on cl 2.6 of the Master
Agreement to claim that the closure of the Advisory Account and the
consequent margin call transactions were unauthorised.

13 On the first day of the trial, the plaintiff abandoned the following
pleaded causes of action against the defendant:

(a) alleged failure to act on his instructions of 23 September 2008 to

convert NZD50m into USD;

(b) alleged breach of duty in providing inaccurate and unreliable

computation of his margin shortfall on 10 October 2008; and

(c) alleged failure by the defendant to advise him not to maintain

his order to sell NZD to USD at the exchange rate of 0.6933.

The trial therefore proceeded only on the plaintiff’s sole remaining cause of
action, ie, the margin call made by the plaintiff on 10 October 2008 was
wrongful by reason of cl 2.6 of the Master Agreement and/or the 48-hour
grace period.

When was the first margin call made by the defendant

14 This is a crucial issue for determination. The plaintiff’s case that the
defendant made a wrong margin call is entirely premised on proof that the
only valid margin call made by the defendant was by way of a letter dated
10 October 2008 sent at about 11.15am. On this basis, the plaintiff
submitted that the defendant was not entitled to close out his FX positions
under the Advisory Account on 10 October 2008 because:

(a) he was entitled to 48 hours to “respond to a margin call” as

promised by the defendant; and/or
[2010] 2 SLR Part 00-cases.book Page 903 Monday, June 21, 2010 2:31 PM

[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 903

(b) he was entitled to at least one business day notice to deliver the
additional collateral as stipulated under cl 2.6 of the Master
Agreement.
15 If the only valid margin call by the defendant occurred on 10 October
2008 (which was a Friday) as alleged by the plaintiff, then the earliest the
defendant was entitled to close out the plaintiff’s FX positions would be
either first thing in the morning of 13 October 2008 (if the 48-hour grace
period applies) or after 11.15am on 13 October 2008 (if cl 2.6 applies).
16 However, if the defendant had made an earlier valid margin call on
either 7 or 8 October 2008, the plaintiff’s submission would be rendered
moot because even if either or both the 48-hour grace period or cl 2.6 had
applied, the FX positions which were closed out at 8.00pm on 10 October
2008 would have been validly closed in any event.
17 It is the defendant’s case that it made the following valid margin calls:
(a) by a fax dated 7 October 2008 wherein the defendant informed
the plaintiff that his “Collateral Availability” under the Advisory
Account had fallen into a “negative of USD610,000”;
(b) by a fax dated 8 October 2008 wherein the defendant informed
the plaintiff that his margin shortfall had increased to
USD2,300,000; and
(c) by letter dated 10 October 2008 wherein the defendant required
the plaintiff to restore the margin shortfall of USD5,460,370.02
in the Collateral Value by 5.00pm Singapore time on the same
day.
From the above, it is self-evident that the plaintiff’s margin shortfall had
deteriorated from USD610,000 on 7 October 2008 to USD5,460,370.02 on
10 October 2008.
18 The plaintiff claimed that the only valid margin call made by the
defendant was by way of the letter dated 10 October 2008. The plaintiff
submitted that the earlier communication did not amount to margin calls.
19 The term “margin call” is not specifically defined in any of the
agreements between the parties. The plaintiff, however, relied on Cynthia
Chin’s AEIC that a margin call occurs when the plaintiff is informed of the
extent of the shortfall and is asked to remedy it.
20 As for the fax dated 7 October 2008, the plaintiff advanced the
following submissions:
(a) the fax was not an official communication from the defendant because
it contained the following notation:
‘This is not an official bank’s statement or advice and is not a substitute
for our official statements or advice. This summary is prepared for you
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904 SINGAPORE LAW REPORTS [2010] 2 SLR

as a service to provide account information and is intended for

discussion purposes only. It may not be complete, accurate or current
and as such, as do not accept any liability for the information reflected
therein. Please refer to our official statements and advices for an
accurate and complete record of your account’.
(b) the fax did not specifically require the plaintiff to restore the margin
shortfall; and
(c) in any event, by about 3.28pm on 7 October 2008 the exchange rates
had improved and the margin shortfall had resolved itself.

21 As for the fax dated 8 October 2008, the plaintiff repeated the same
submissions save that sub-para (c) did not apply on 8 October 2008.

Did the plaintiff regard the faxes from the defendant dated 7 and
8 October as “margin calls” which required him to take steps to clear the
shortfall
22 It may well be that the faxes of 7 and 8 October contained the notation
that they did not constitute “official bank’s statement or advice …” and that
they did not explicitly require the plaintiff to clear the margin shortfall. It
remains necessary to examine the plaintiff’s responses to the faxes.
23 Counsel for the defendant drew my attention to the evidence that the
plaintiff was clearly aware that the above faxes constituted margin calls
which required him to take steps to rectify the margin shortfall:
(a) First, the plaintiff admitted in his AEIC that by reason of the
margin shortfall of USD610,000, the defendant became entitled to
close the account on 7 October 2008:
19. On 7th October 2008, I was informed by the Defendant that my
account had shortfall of USD 610,000.
20. An account shortfall occurs when the value of my collateral, as
determined by the Defendant, is deemed to be less than my total
exposure in my currency trading account with the Defendant. The
account shortfall occurred mainly as a result of the Defendant’s failure
to convert part or all of my deposits into USD. If the Defendant
insisted, under the terms and/or powers it claimed to have based on the
documents signed by me, that I should convert all my deposits into
USD in September 2008 I would be obliged to do – just like the many
options I traded.
21. Pursuant to the terms of Defendant’s Service Agreement, the
Defendant should be entitled to close my account upon an account
shortfall.
22. Therefore, the Defendant became entitled to close my account once
there was an account shortfall of USD610,000 on 7th October 2008.
[emphasis added]
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 905

The reference to USD610,000 in para 19 and 22 of the plaintiff’s AEIC

was taken from the defendant’s fax dated 7 October 2008. However,
the plaintiff claimed that the assertions in his AEIC were made only
with reference to the Service Agreement. While it is true that the
plaintiff did not refer to the Master Agreement in this context, his
omission to do so is most telling. Clearly, the plaintiff did not regard
that the defendant’s right to close out the FX positions under the
Service Agreement was curtailed in any way by cl 2.6 of the Master
Agreement. If it was otherwise, the plaintiff would have raised it. It is
simply not open to the plaintiff to “blow hot and cold”.
(b) Following the fax dated 7 October 2008, Cynthia Chin spoke to
the plaintiff at around 4.59pm. The plaintiff then instructed the
defendant to place a “Limit Order” to sell Australian Dollars
(“AUD”) 10,000,000 for CHF at the AUD/CHF exchange rate of
0.8413 for the purpose of reducing the shortfall. This was
acknowledged by the plaintiff under cross-examination:
Q: This is the phone conversation we were just looking at
paragraph 107. Having done the calculation, Cynthia calls you at
4.59pm and tells you that liquidating AUD8 million would
reduce your shortfall by about USD430,000 correct?
A: Yes.
Q: Then you say that at paragraph 108, you actually told Cynthia
that you wanted to place a limit order to sell Australian dollars
for Swiss franc, correct?
A: Yes.
Q: And not a spot trade, correct?
A: Correct.
Q: So, then you discuss, and Cynthia tells you that the Australian
dollar, Swiss franc exchange rate was 0.8219 at present, and hit a
high of 0.8309 that day.
A: Yes.
Q: Then you place a limit order to sell 10 million Australian dollars
for Swiss franc, at the exchange rate of 0.8413, which would
expire on 8 October 2008 at 5.00pm, correct?
A: Yes.
Q: And basically you were doing these things, Mr Lam, to, in a way,
trade yourself out of the account shortfall correct?
A: Yeah.
[emphasis added]

(c) Similarly on 8 October 2008 after receipt of the fax from the
defendant, Cynthia Chin again spoke to the plaintiff and received
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906 SINGAPORE LAW REPORTS [2010] 2 SLR

instructions to place a “Limit Order” to sell NZD for JPY with a view
to resolving the shortfall.
Q: (a) is sell NZD10 million for Japanese yen and then sell another
10 million Japanese yen at this other rate. There are two different
rates?
A: Yes.
Q: There were limit orders, not spot transactions; right?
A: That’s correct.
Q: So it’s correct for me to say, Mr Lam, that you were taking all
these steps to reduce your account shortfall; right?
A: Yeah
Q: The bank could have closed you out immediately on 8 October,
but they let you carry out these trades so that you can try to
reduce your account shortfall; correct?
A: The bank would have served me a formal notice and closed my
accounts, yeah.
Q: Mr Lam, whether the bank needs to serve you a formal notice,
we will come to that and I can refer to that in the submissions
later as to what the service agreement says.
A: Okay.
Q: But my point is, instead of closing you out immediately, on
8 October the bank was allowing you to do these standing or limit
orders for you to try to reduce your shortfall; correct?
A: Yeah.
[emphasis added]
(d) While the defendant may not have expressly informed the
plaintiff to clear the margin shortfall, by the plaintiff’s own conduct,
he was left in no doubt that his account was in margin shortfall on 7
and 8 October 2008 and that he was required to take steps and in fact
took steps with a view to clearing the shortfall by trading himself out
of it. After all, the plaintiff was a seasoned FX investor. He knew
exactly what he was required to do when his account fell into margin
shortfall.
(e) The validity of the margin call must be determined at the time
when it was made. On 7 October 2008 when the defendant sent the
fax, there was no doubt that the plaintiff’s Advisory Account was in
margin shortfall of USD610,000. The fact that the shortfall resolved
itself later in the day at 3.28pm did not change the fact that it was a
valid margin call when it was made.
24 Based on the evidence, I find that the defendant made a valid margin
call on 7 October 2008 when the plaintiff was informed that his account was
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 907

in margin shortfall to the tune of USD610,000. As the margin shortfall

deteriorated further, the defendant made further margin calls on 8 and
10 October 2008. The plaintiff knew he was required to clear the margin
shortfall but unsuccessfully tried to resolve it with his “Limit Orders”. On
this finding alone, the plaintiff’s claim must fail irrespective of whether
cl 2.6 of the Master Agreement or the 48-hour grace period was applicable.

Whether the transactions were governed by the Master Agreement

25 For completeness I shall also examine the plaintiff’s case assuming
that the only valid margin call was made on 10 October 2008. In this regard,
it is relevant to consider whether the margin call of 10 October 2008 was
made in breach of cl 2.6 of the Master Agreement.
26 The Master Agreement, together with the Service Agreement and the
Security Agreement, were all signed by the plaintiff on 28 November 2007
when he opened the Advisory Account and the FX Gem Account with the
defendant. There is no dispute that the FX positions which were closed out
by the defendant on 10 October 2008 were under the Advisory Account.
27 The defendant denied that the Master Agreement applied to
transactions under the Advisory Account. The defendant submitted that
the Master Agreement only applied to options and derivatives trading
under the FX Gem Account where the defendant was a counterparty to the
plaintiff in the transactions.
Clause 9 of the Master Agreement defined the transactions which are
governed by the agreement:
9. TRANSACTIONS UNDER THIS AGREEMENT
The bank and the Counterparty may enter into such Transactions under
this Agreement as they may from time to time determine. Such
Transactions include, without limitation, the following:
(a) FX Transactions and Currency Option Transactions
The definitions and provisions contained in the 1998 FX and
Currency Option Definitions (as published by the International
Swaps and Derivatives Association, Inc. the Emerging Markets
Traders Association and the Foreign Exchange Committee), as
revised, amended, supplemented or replaced from time to time
(the ‘FX and Currency Definitions’), shall be incorporated into
any Transaction specified to be an FX Transaction or a Currency
Option Transaction in the relevant Confirmation.
(b) Equity Option and Equity Swap Transactions
The definitions and provisions contained in the 2002 Equity
Derivatives Definitions (as published by the International Swaps
and Derivatives Association, Inc.) as revised, amended,
supplemented or replaced from time to time (the ‘Equity
Derivatives Definitions’), shall be incorporated into any
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908 SINGAPORE LAW REPORTS [2010] 2 SLR

Transaction specified to be an Equity Option Transaction or

Equity Swap Transaction in the relevant Confirmation.
(c) Swap Transactions
The definitions and provisions contained in the 2000 ISDA
Definitions (as published by the International Swaps and
Derivatives Association, Inc.) as revised, amendment,
supplemented or replaced from time to time (the ‘2000 ISDA
Definitions’) shall be incorporated into any Transaction
specified to be a Swap Transaction in the relevant Confirmation.
(d) Other Transactions
The parties may enter into such other Transactions apart from
those specified in sub-Clauses (a) to (c) above, and which may
incorporate such other definitions and provisions, as may be
further described in the relevant Confirmation.
The FX and Currency Definitions, the Equity Derivatives Definitions, the
2000 ISDA Definitions and such other definitions and provisions referred to
in sub-Clause (d) shall together be known as the ‘Product Specific
Definitions’. In the event of any inconsistency between the Product Specific
Definitions and the provisions of the Confirmation, the Confirmation will
prevail.
[emphasis added]
28 The defendant submitted that for transactions under the Advisory
Account, the defendant was not the counterparty to the plaintiff and
therefore the Master Agreement did not apply to those transactions.
Furthermore, Cynthia Chin testified that if the plaintiff did not wish to
engage in options and derivatives, there would be no necessity to sign the
Master Agreement. This was not challenged by the plaintiff.
29 On the other hand, the plaintiff correctly submitted that the
applicability of the Master Agreement is not dependent on the type of
account but rather the type of transaction.
30 It appears to me that the defendant’s submission is neither supported
by the terms of the Master Agreement nor by its own conduct:
(a) Clause 10 of the Master Agreement specifically stipulated that
the Master Agreement shall apply to all Derivatives Transactions. The
Master Agreement is not restricted only to transactions under the FX
Gem Account. Clause 10 provides, inter alia, as follows:
Upon the execution of this Agreement and unless the parties to this
Agreement otherwise agree in writing by specific reference to this
Agreement that this provision does not apply, all Derivatives
Transactions (as defined below) then outstanding, or which may be
entered into thereafter, between the Counterparty and the Singapore
branch and/or Hong Kong branch (as the case may be) of the Bank
including, without limitation, any transactions entered into pursuant
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 909

to the Bank’s Collateralised Trading Agreement, ISDA Master

Agreement and/or any other agreement are deemed to be Transactions
governed by this Agreement and any confirmation or other confirming
evidence of the Transaction shall be deemed to be a Confirmation.
‘Derivatives Transaction’ means any transaction (including an
agreement with respect thereto) which is a rate swap transaction, a
swap option, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction
… or other financial instrument or interest, or any other similar
transaction (including any option with respect to any of these
transactions) and any combination of these transactions.
[emphasis added]
Under cl 10, the Master Agreement applied to “any transactions
entered into pursuant to the Bank’s Collaterised Agreement … and/or
any other agreement”. This would include the Service and Security
Agreements. Furthermore, it expressly applied to any “Derivatives
Transaction” which by definition in cl 10 would include any foreign
exchange transaction.
(b) Even if there is some ambiguity as to whether the foreign
exchange transactions referred to in the definition of “Derivatives
Transaction” under cl 10 should be confined to derivatives involving
foreign exchange, counsel for the plaintiff helpfully pointed out that
the standard form draft board resolution for corporate clients who
wish to enter into the Master Agreement clearly contemplates that
foreign exchange transactions are distinct from derivatives:
(2) That all foreign exchange and/or derivative transactions entered
or to be entered into by the Company with the Bank shall be governed
by and subject to the terms and conditions set out in the Master
Agreement
[emphasis added]
It is therefore not restricted to only FX options or derivatives as
alleged by the defendant.
(c) FX transaction is not specifically defined in the Master
Agreement. Unless otherwise stated, it should be given its ordinary
meaning and should encompass any transaction involving foreign
currencies. The principal activity of the plaintiff under the Advisory
Account was “Carry Trade Investment Strategy”. The plaintiff’s
deposits with the defendant were in AUD, NZD, and USD. His loan
currencies with the defendant were JPY and CHF. In the absence of a
contrary definition, I accept the plaintiff’s submission that his
deposits and loans in foreign currencies with the defendant would
amount to FX transactions within the meaning of cl 10 of the Master
Agreement.
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910 SINGAPORE LAW REPORTS [2010] 2 SLR

(d) From the evidence, it is clear that in managing his “Carry Trade
Investment Strategy”, the plaintiff would place “Limit Orders” with
the defendant to sell various currencies at specific exchange rates for
other currencies to pay down the loan currencies. This is a clear
characteristic of an FX transaction.
(e) The defendant has also brought a counterclaim against the
plaintiff in this action for losses arising from the FX positions which
were closed by the defendant on 10 October 2008 under the Advisory
Account. In bringing the counterclaim, the defendant had in effect
treated the plaintiff as the counterparty in respect of the margin call
transactions.
(f) Finally and perhaps most significantly, the defendant in its letter
dated 10 October 2008 referred to both the Master Agreement and the
Service Agreement in requiring the plaintiff to take immediate steps
to restore the margin shortfall. By a subsequent letter dated
13 October 2008, the defendant also referred to the Master
Agreement and the Service Agreement when it informed the plaintiff
that it had closed the plaintiff’s FX positions on 10 October 2008. The
defendant has not provided any explanation to reconcile their reliance
on the Master Agreement in their letters dated 10 and 13 October
2008 with their submission that the Master Agreement was not
applicable to the transactions under the Advisory Account. No
evidence was led by the defendant to explain away their reference to
the Master Agreement in the two letters.
31 It may well be that the plaintiff was not required to sign the Master
Agreement if he did not wish to engage in options or derivatives trading.
However, the undeniable fact remains that the defendant did require the
plaintiff to sign and it was so signed. Furthermore, it provides no
explanation for the defendant’s own reliance on the Master Agreement in
the two letters to the plaintiff in respect of the FX positions under the
Advisory Account.
32 In these circumstances, it was hardly surprising when counsel for the
defendant acknowledged the sheer all encompassing width of the Master
Agreement in his opening:
[T]hat if you read clauses 9 and 10, it’s so wide in its usual manner that it can
include all sorts of things
[emphasis added]

Did clause 2.6 of the Master Agreement apply to the margin calls
33 Clause 2.6 provides as follows:
2.6 The Bank shall at its absolute discretion prescribe the amount of
margin or collateral that the Counterparty or any Credit Support Provider
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 911

must provide to the Bank in order to secure the Counterparty’s obligations to

the Bank under the Transactions, and may from time to time amend or add
to such margin or collateral requirements. Such margin or collateral
requirements may be notified by the Bank to the Counterparty in writing or
verbally. If the Bank shall for any reason deem that there is insufficient
collateral held pursuant to the terms of the Credit Support Documents that is
available to satisfy the Counterparty’s present or future obligations under the
Agreement or the Counterparty’s present or future obligations under any other
agreement or arrangement between the Counterparty and the Bank, the
Counterparty shall within one business day’s notice thereof deliver additional
collateral of a type acceptable to the Bank in its sole discretion (which collateral
shall be delivered and secured pursuant to any existing Credit Support
Document or other arrangement in a form satisfactory to the Bank in its sole
discretion) in an amount as may be required by the Bank. The margin or
collateral provided to the Bank as security for the Counterparty’s obligations
to the Bank under the Transactions is in addition to and without prejudice to
any other collateral or margin which the Bank may now or hereafter hold
from the Counterparty … For the avoidance of doubt, if the Counterparty
fails to deliver such additional collateral, such failure shall constitute an Event
of Default in respect of the Counterparty pursuant to Clause 5 below and the
Bank may proceed to terminate some or all of the Transactions at its discretion
pursuant to Clause 5 without further notice to the Counterparty other than
the notice of termination to be provided under Clause 5.4. [emphasis added]
The plaintiff maintained that cl 2.6 was applicable to the margin call since
the Master Agreement applied to all FX transactions. However, that alone
does not inexorably lead to the conclusion that the margin call made by the
defendant on 10 October 2008 was necessarily governed by cl 2.6.
34 To understand the purport of cl 2.6, a close examination of the clause
is essential:
(a) It entitled the defendant to require the plaintiff to deliver
additional collateral if the defendant should deem for any reason that
the existing collateral was insufficient.
(b) The entitlement to require additional collateral was to cover
present or future obligations of the plaintiff to the defendant.
(c) The one business day notice was for the plaintiff to deliver
additional collateral of a type and in an amount as required by the
defendant.
(d) Failure to deliver the additional collateral would constitute an
event of default which would entitle the defendant to terminate all of
the plaintiff’s transactions at its discretion without further notice.
35 On the face of cl 2.6, the defendant was entitled to require the plaintiff
to deliver additional collateral even if the account was not in a margin
shortfall. This is clear from cl 2.6 which entitled the defendant to require
the plaintiff to bring in additional collateral if the defendant should deem
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912 SINGAPORE LAW REPORTS [2010] 2 SLR

that the existing collateral was insufficient for whatever reason.

Furthermore, the fact that the additional collateral to be delivered is to
satisfy future obligations lends support to the construction that cl 2.6 is
applicable even if the account is not in margin shortfall. When cl 2.6 was
dissected in this manner, counsel for the plaintiff candidly accepted that
cl 2.6 would apply even when the account was not in margin shortfall.
36 It follows that when the plaintiff’s account fell into margin shortfall
between 7 and 10 October 2008, there was no necessity for the defendant to
rely on cl 2.6. It is important to recognise that cl 2.6 is not designed to give
the plaintiff time before the defendant could close the FX positions when
the account is in margin shortfall. Instead, cl 2.6 confers a right on the
defendant to require the plaintiff to deliver additional collateral in such an
amount if the defendant so requires. The one business day notice only
comes into play if the defendant should decide to invoke cl 2.6 and not
otherwise. Counsel for the plaintiff submitted that while cl 2.6 would apply
even if the account was not in margin shortfall, it is nevertheless wide
enough to cover a situation when the account was in such shortfall.
37 The defendant submitted that it was contractually entitled to close out
the plaintiff’s FX positions under the Advisory Account at any time and
without notice. The defendant relied, inter alia, on the Service Agreement
which provides as follows:

Credit banking and foreign exchange facilities

1. We may (but need not) grant you credit banking and foreign exchange
facilities (‘Facilities’) in accordance with the terms of this Service Agreement
and other terms as may be agreed. All Facilities are made available on an
uncommitted basis and subject to the provision of adequate collateral. We
may at any time and from time to time vary, suspend or terminate any or all
Facilities without prior notice. In such event, all your Liabilities under the
Facilities shall become immediately due and payable.
2. Any payment relating to the Facilities not made when due shall bear
interest at such rate as we may reasonably determine. Such interest shall
accrue and be calculated daily from and including the due date until but
excluding the actual payment date. Such interest may be capitalised by us
monthly, and itself bear interest.
3. We have the right to determine the total value of collateral we consider
acceptable (‘Collateral Value’).
4. We may assign a lower Collateral Value to collateral denominated in
currencies different from the currencies of our exposure to you to take into
account our currency exchange rate risk.
5. The Collateral Value must not be less than 100% of the Total Exposure
[as defined below] at any time …
6. If at any time, the Collateral Value is less than 100% of the Total
Exposure, we may exercise our Rights on Termination. We may (but need
[2010] 2 SLR Part 00-cases.book Page 913 Monday, June 21, 2010 2:31 PM

[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 913

not) allow you time to restore the Collateral Value to more than 100% of the
Total Exposure.
38 It is clear that under the Service Agreement, the plaintiff was required
to ensure that the Collateral Value, which is the value of the plaintiff’s
collateral as determined by the defendant, must not be less than 100% of his
Total Exposure and if it is less than the requisite 100%, the defendant may
terminate the transactions under the Advisory Account without providing
any time to the plaintiff to restore the shortfall. This was not only
undisputed by the plaintiff but was admitted to be so in his AEIC and under
cross-examination.
39 Although the defendant’s letter dated 10 October 2008 referred to
both the Master Agreement and the Service Agreement, it is clear from the
language of the letter that the defendant’s notice to the plaintiff to clear the
shortfall (not to deliver any specific additional collateral) was made
pursuant to the Service Agreement:
(a) It specifically referred to the requirement for the plaintiff “to
maintain the value of the Collateral pledged to us at not less than
100% of your Total Exposure to us”. This mirrors the requirement
under cl 5 (Credit banking and foreign exchange facilities) of the
Service Agreement.
(b) Clause 2.6 would apply in a situation when the defendant
invokes the right to direct the plaintiff to deliver additional collateral
of a type acceptable and in an amount required by the defendant. Not
only was cl 2.6 not referred to, the letter did not specify any amount
which the plaintiff was required to deliver. It merely required the
plaintiff to clear the shortfall by either providing additional collateral
or reducing his Total Exposure to the defendant.
40 On 10 October 2008, the plaintiff’s margin shortfall reached a critical
level. His account was then in negative equity of about USD1,054,612.74.
This meant that if all the plaintiff’s foreign currency deposits were
liquidated, the proceeds would be insufficient to repay the plaintiff’s foreign
currency loans which he owed to the defendant. In other words, on
10 October 2008, the defendant’s ability to recover their foreign currency
loans from the plaintiff was at risk. This is to be contrasted with the
plaintiff’s margin shortfall between 7 and 9 October 2008 which were still in
positive equity. Although it is not disputed that the defendant did not have
additional rights when the account fell into negative equity, it does not alter
the fact that the defendant was entitled to close out the plaintiff’s FX
positions on 10 October 2008 without giving time to the plaintiff since his
account had been in margin shortfall since 7 October 2008, be it negative or
positive equity.
41 Accordingly, on a true construction of cl 2.6 read together with the
defendant’s letter of 10 October 2008, I find that none of the margin calls
[2010] 2 SLR Part 00-cases.book Page 914 Monday, June 21, 2010 2:31 PM

914 SINGAPORE LAW REPORTS [2010] 2 SLR

including the letter of 10 October 2008 was governed by cl 2.6 of the Master
Agreement. In this connection, it should be recalled that cl 2.6 was
originally pleaded by the plaintiff’s previous solicitors to the effect that he
should have been given one business day to clear the margin shortfall. It
was then deleted by way of an amendment in February 2009. However, it
was restored by way of a further amendment on the first day of the trial by
his current solicitors. Under cross-examination, the plaintiff was not able to
provide any coherent explanation for his inexplicable “about-turns” on the
applicability of cl 2.6.

Clause 2.6 would not have assisted the plaintiff in any event
42 As I have already found that cl 2.6 did not govern any of the margin
calls, it is strictly not necessary to deal with this issue. However, even if
cl 2.6 was held to have been applicable, it would not have changed the
outcome.
43 Under cl 2.6, time begins to run when the defendant requires the
plaintiff to deliver additional collateral in an amount required by the
defendant. It is important to note that the one business day under cl 2.6 is
intended for a specific purpose, ie, time to deliver the required additional
collateral. The time allowed under cl 2.6 was not to prevent the defendant
from closing out the FX positions prior to the expiry of the one business day
notice. While the defendant did inform the plaintiff of the shortfall and that
he was required to clear it, it did not expressly direct the plaintiff to deliver
any specific additional collateral. It was for the plaintiff to clear the shortfall
which could be achieved by either delivering additional collateral or by
reducing his Total Exposure. The choice was the plaintiff’s. He elected to
reduce his Total Exposure with his “Limit Orders” but they were
insufficient to do so. In fact, the shortfall deteriorated significantly in spite
of the “Limit Orders”.
44 The plaintiff was in fact given more than one business day to deliver
additional collateral. Assuming that the margin call was only made on
10 October 2008 as alleged by the plaintiff and taking his case at its highest,
it is not disputed that after the plaintiff received the letter of 10 October
2008, Cynthia Chin informed him that the defendant would allow him to
deliver additional collateral by the following Tuesday on 14 October 2008 if
he could provide a commitment that he would do so:

CYNTHIA: So, so now it’s negative, I calculated and calculated, it’s

already about 1 million.
DAVID: Wah! Go to this extent already huh?
CYNTHIA: Yes, yes, the Yen is really very strong, so, nah, have this
type of −
nah, actually our er, credit −
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 915

DAVID: Yes.
CYNTHIA: − he is okay, he does not − does not require it to be closed
off.
DAVID: Yes.
CYNTHIA: He requires that if it can be done −
DAVID: Yes.
CYNTHIA: − to remit to cover, then we can wait until next Tuesday
then come and − come and close off slowly. So their policy
is not to close off straightaway, as long as you, okay, give a
commitment (to) remit how much, then we will hold it lor.
DAVID: “Orh, now it is not possible because now my those − my
those er, BOC those now it’s also − there is er, 3 over
million US dollar, plus 700 plus (clear the throat) 3 over
million Kiwi everything have been remitted to you
already, right?

[emphasis added]
In this way, the plaintiff was effectively granted more than two business
days to deliver the additional collateral. The fact that the extension of time
was conditional on the plaintiff’s commitment did not alter the fact that it
was an extension nonetheless. After all, the one business day notice under
cl 2.6 was to enable the plaintiff to deliver the additional collateral. If the
plaintiff’s intention was to use the one business day to deliver additional
collateral, there would be no sensible reason for him not to give the
commitment. It was not unreasonable for the defendant to enquire whether
the plaintiff had any intention to do so. The plaintiff could well have given
the commitment to the defendant but to his credit, he testified that he
would only have done so if he was “hundred per cent sure” that he could
deliver the additional collateral. Since the plaintiff knew that he would not
be able to do so, the commitment was not provided to the defendant.
45 Finally, the one business day notice under cl 2.6 was to allow the
plaintiff time to provide the additional collateral. By his own evidence, he
confirmed that he was unwilling and/or unable to do so even if the time was
extended to 14 October 2008. This was admitted by the plaintiff under
cross-examination:

Cross-Examination of David Lam

Q: On 10 October 2008, three days later, with a US$5.4 million shortfall,
the bank is asking you nicely, please put in some monies to give them
some assurance; right?
A: Yes.
Q: Your response is very clear. You don’t have money; right?
A: Yes.
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916 SINGAPORE LAW REPORTS [2010] 2 SLR

Q: Even if you do have money, you are not going to put it in because every
account is like an independent ship; correct?
A: Yes.
[emphasis added]

46 The plaintiff was reluctant to top up his collateral because in his view
the fresh collateral would be “doomed too”:

CYNTHIA: Then is there a chance to say remit a bit---

DAVID: No, because now the---the situation no matter how much
I bring in, it will be doomed also, right? Can only do it in
this way first, then in future---

47 In the light of the evidence, there was no breach of cl 2.6 by the

defendant even if it had applied. Ultimately the one business day notice was
to give the plaintiff time to deliver the additional collateral. From the
evidence, it is clear that the plaintiff had categorically informed the
defendant in no uncertain terms that he did not require the time to do so.

The 48-hour grace period

48 As I have already determined that a valid margin call was made on
7 October 2008, proof of promise to extend a 48-hour grace period to the
plaintiff would have been inconsequential. As submissions were made by
both parties, I shall deal with this issue nonetheless.

Promissory estoppel
49 The plaintiff relies on promissory estoppel to preclude the defendant
from relying on the terms of the Service Agreement to close out the
plaintiff’s FX positions without notice.
50 Counsel for the defendant submitted that three elements must be
satisfied to raise the defence of promissory estoppel:
(a) a promise or representation;
(b) reliance; and
(c) detriment.
The Court of Appeal decision of United Overseas Bank Ltd v Bank of China
[2006] 1 SLR(R) 57 (“United Overseas Bank Ltd”) was cited in support.
51 Counsel for the plaintiff, however, submitted that for promissory
estoppel, it is strictly not necessary to prove detriment. It is sufficient for the
plaintiff to prove that it would be inequitable to allow the defendant to act
in a manner inconsistent with the promise: see Chitty on Contracts vol 1
(Thomson Reuters (Legal) Limited, 30th Ed, 2008) at para 3−094 cited with
approval in Abdul Jalil bin Ahmad bin Talib v A Formation Construction
[2010] 2 SLR Part 00-cases.book Page 917 Monday, June 21, 2010 2:31 PM

[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 917

Pte Ltd [2006] 4 SLR(R) 778 at [43] and [44] (“Abdul Jalil”). In Abdul Jalil,
Judith Prakash J held (at [44]):
… As for the third element, there has been some discussion as to whether
there must be ‘detriment’ suffered by the debtor before the creditor is
estopped from going back on his promise. In this respect, Chitty on Contracts
([42] supra) at para 3−135, asserts that the better view is that detriment of the
kind required for the purpose of estoppel by representation is not an essential
requirement and all that is necessary is that the promisee should have acted in
reliance on the promise in such a way as to make it inequitable to allow the
promisor to act inconsistently with it. Chitty on Contracts also states that by
making the payment, a debtor would act in reliance on the creditor’s promise
and so make it prima facie inequitable for the creditor to peremptorily go
back on his promise. …
[emphasis added]

The Court of Appeal upheld her decision (judgment reported at [2007]

3 SLR(R) 592) but on the issue of detriment, it left the question open when
it observed (at [48]):
In this appeal, counsel for the appellants has not challenged the correctness of
the Judge’s ruling on the third condition. It is therefore not necessary for us
to enter into this controversy without the benefit of arguments to the
contrary.

52 The leading case referred to by Chitty on Contracts (30th Ed)

at para 3−094 for the proposition that the doctrine can apply in the absence
of detriment is W J Alan & Co Ltd v El Nasr Export & Import Co [1972]
2 QB 189 at 213 (“W J Alan”). In W J Alan, the sellers agreed to sell two lots
of coffee FOB Mombasa at the price of “shs262/- … per cwt”. At that time,
Kenya shilling and sterling shilling were of equal value. The buyers opened
an irrevocable letter of credit (“L/C”) in sterling shilling for the first
shipment which the sellers accepted. When the cargo of coffee was loaded
for the second shipment, the sterling devalued. The sellers rejected the L/C
for the second shipment on the ground that Kenya shilling was the currency
of account for the contracts. The buyers, however, claimed that their
payment obligation had been discharged because the currency of account
was sterling and even if it was Kenya shilling, the sellers had agreed to vary
and/or waive the payment term by accepting sterling. The Court of Appeal
in W J Alan held that the sellers by accepting payment under a sterling L/C
had irrevocably waived their right to receive payment in Kenyan currency.
Waiver and promissory estoppel were treated in the same vein. The
following passage from the judgment of Lord Denning in W J Alan is often
cited in support of the proposition that detriment is not essential for
promissory estoppel:
A seller may, by his conduct, lead the buyer to believe that he is not insisting
on the stipulated time for exercising an option: Bruner v. Moore [1904] 1 Ch.
305. A buyer may, by requesting delivery, lead the seller to believe that he is
[2010] 2 SLR Part 00-cases.book Page 918 Monday, June 21, 2010 2:31 PM

918 SINGAPORE LAW REPORTS [2010] 2 SLR

not insisting on the contractual time for delivery: Charles Rickards Ltd. v.
Oppenhaim [1950] 1 K.B. 616, 621. A seller may, by his conduct, lead the
buyer to believe that he will not insist on a confirmed letter of credit:
Plasticmoda [1952] 1 Lloyd’s Rep. 527, but will accept an unconfirmed one
instead: Panoustsos v. Raymond Hadley Corporation of New York [1917] 2
K.B. 473; Enrico Furst & Co. v. W. E. Fischer [1960] 2 Lloyd’s Rep. 340. A
seller may accept a less sum for his goods than the contracted price, thus
inducing him to believe that he will not enforce payment of the balance:
Central London Property Trust Ltd. v. High Trees House Ltd. [1947] K.B. 130
and D. & C. Builders Ltd. v. Rees [1966] 2 Q.B. 617, 624. In none of these cases
does the party who acts on the belief suffer any detriment. It is not a detriment,
but a benefit to him, to have an extension of time or to pay less, or as the case
may be. Nevertheless, he has conducted his affairs on the basis that he has that
benefit and it would not be equitable now to deprive him of it.
[emphasis added]
53 In W J Alan, the buyers had relied on the sellers’ implied promise that
he could pay in sterling shilling. Consequently, the buyers did not purchase
Kenya shilling prior to the devaluation. In a sense, the buyers would have
suffered a “detriment” if the sellers were permitted to go back on their
promise since they would have to purchase Kenya shilling at a higher
exchange rate. Lord Denning sought to reconcile the previous decisions on
the basis that the parties in those cases did not suffer any detriment but
were instead deprived of the benefit if the promisor was permitted to resile
from his promise. It has been commented that Lord Denning was using the
word “detriment” in the narrow sense of either incurring a liability or an
expenditure: see George Spencer Bower, The Law Relating to Estoppel by
Representation (Piers Feltham et al eds) (LexisNexis UK, 4th Ed, 2004)
(“Bower”) at para XIV.2.41.
54 W J Alan was referred to by Grimberg JC in Fu Loong Lithographer
Pte Ltd v Mun Hean Realty Pte Ltd [1989] 1 SLR(R) 194 at [37]. The learned
judicial commissioner observed that there has been “a divergence of judicial
opinion as to whether the alteration in the position of the party seeking to
set up estoppel need result in detriment to him”. After referring to George
Spencer Bower, The Law Relating to Estoppel by Representation (Alexander
Kingcome Turner ed) (Butterworths, 3rd Ed, 1977), the learned judicial
commissioner equated detriment to mean “injustice to the promisee which
would result if the promisor were allowed to recede from his promise”
(at [38]).
55 The principal reason for the divergence of judicial and academic
opinion about the requirement to establish a detriment is because the term
“detriment” has not been used consistently: see Bower at p 481. It has been
used to describe:
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 919

(a) Expenditure of money and time

In Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd
[2009] 2 SLR(R) 532, the court held that the plaintiff was estopped
from relying on the correct version of the arbitration clause because
the defendant had commenced arbitration proceedings under the ICC
Rules and had paid the sum of US$30,000 to the ICC based on an
outdated version of the general conditions which was provided by the
plaintiff. The court found that the payment of the US$30,000
constituted “detriment”. Similarly in Hartley v Hymans [1920]
3 KB 475, the buyer was found to be estopped from exercising his
right to terminate because by his conduct he had led the seller to
believe that the contract was still valid (even though the delay would
have justified termination) and the seller had incurred expenditure in
preparation for future deliveries.
(b) Incurring a liability
In Fenner v Blake [1900] 1 QB 426, the tenant represented to the
landlord that he wanted to vacate the premises midway during the
tenancy. Relying on the representation, the landlord sold the premises
to a third party. The tenant subsequently refused to vacate the
premises and claimed there was no consideration for his promise to
quit the premises. The court had no hesitation in finding that the
tenant was estopped from resiling from his promise to vacate the
premises because the landlord had incurred a liability in relying on
the tenant’s promise by entering into the sale and purchase agreement
for the premises. In so doing, the landlord had rendered himself liable
to an action at the suit of the purchaser if he was unable to provide
vacant possession.
(c) Change of position
The locus classicus of this species of detriment is none other than
Thomas Hughes v The Directors of the Metropolitan Railway Company
(1877) 2 App Cas 439 (“Hughes”). In that case, the owner of the
freehold gave six months notice to the lessee to repair the premises.
The lessee, however, made an offer to purchase the owner’s leasehold
interest. Unfortunately, the negotiations which went on for some time
did not result in the sale whereupon the owner gave the lessee notice
of ejectment for failing to complete the repairs on time. The court
found that the owner was estopped from enforcing its strict legal
rights because the lessee had changed his position by relying on the
owner’s implied promise that he would not be required to repair the
premises while the negotiations were underway.
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920 SINGAPORE LAW REPORTS [2010] 2 SLR

(d) Deprivation of benefit

This has already been covered in W J Alan in [52]−[53] above. In W J
Alan, the buyers through the sellers’ conduct was led to believe that
payment could be made in sterling shilling. The court found that the
sellers had irrevocably waived the right to receive payment in Kenyan
currency. If the sellers were permitted to withdraw from the promise,
the buyers would be deprived of the benefit to pay in sterling shilling
which by that time had devalued against Kenya shilling.
56 Expenditure of money/time and incurring a liability have often been
described as “detriment” in the narrow sense because in both these
situations, the promisee had already suffered the “detriment” in reliance on
the promise. However as for change of position and deprivation of benefit,
the promisee would only suffer the “detriment” if the promisor is permitted
to resile from his promise. This is commonly described as “detriment” in
the broader sense.
57 In my view, it will not be helpful to attach labels to properly
characterise “detriment”. The overarching principle in each of these
categories is that the doctrine has consistently been held to apply in
circumstances when it was inequitable either in the narrow or broader
sense of “detriment” for the promisor to resile from his promise and to
enforce his strict legal rights. This was after all the foundation of the
doctrine as developed in Hughes (per Lord Cairns at 448):
[I]f parties who have entered into definite and distinct terms involving
certain legal results – certain penalties or legal forfeiture – afterwards by their
own act or with their own consent enter upon a course of negotiation which
has the effect of leading one of the parties to suppose that the strict rights
arising under the contract will not be enforced, or will be kept in suspense, or
held in abeyance, the person who otherwise might have enforced those rights
will not be allowed to enforce them where it would be inequitable having regard
to the dealings which have thus taken place between the parties. [emphasis
added]

58 Accordingly, I will examine whether, on the facts of the present case,

it would be inequitable for the defendant to enforce its strict legal rights
under the Service Agreement if the plaintiff was in fact promised a 48-hour
grace period to respond to the margin call.
59 Curiously, in spite of the submission by the plaintiff’s counsel that
there is no requirement to prove detriment, in the reply and defence to
counterclaim the plaintiff alleged that he had suffered detriment:
c. The Plaintiff suffered detriment when the Defendant reneged on this
promise/agreement as the Plaintiff was denied more time to restore the
alleged Shortfall and the benefit of more favourable exchange rates
anticipated by the Plaintiff to be the result of the G7 meeting which was to
take place over the weekend on11 to 12 October 2008. The Plaintiff reiterate
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 921

that paragraph 14B(b) of the Statement of Claim (Amendment No. 2) and

says that as at 13 October 2008, there would not have been any alleged
Shortfall. [emphasis added]

60 Before analysing each of the three elements, I should perhaps first deal
with the defendant’s submission that the defence only applies “as a shield
and not a sword”. The plaintiff’s reliance on the doctrine was to preclude
the defendant from relying on their contractual right to close out without
notice under the Service Agreement. Viewed in this way, there can be no
dispute that it was indeed raised as a “shield”.

Was the promise made

61 The plaintiff claimed that he was promised by the defendant’s

managing director, Mr Torsten Linke (“Mr Linke”) some time in July 2008
that the defendant would grant him a 48-hour grace period to “respond to a
margin call”. According to the plaintiff, he was extended the preferential
term of a 48-hour grace period because he was regarded as an important
client of the defendant. This accords with the defendant’s call report dated
8 May 2008 in which the plaintiff was described as a “key client” of the
defendant when he first met Mr Linke. Given the size of the plaintiff’s
deposits and his loans with the defendant, he would indeed be aptly
described as a “key” or “important” client of the defendant. This is also in
line with the fact that the plaintiff was granted other preferential terms by
the defendant such as attractive loan spread and deposit rates.

62 I accept the plaintiff’s submission that the promise was made:

(a) Although the 48-hour grace period was specifically pleaded and
asserted in the plaintiff’s AEIC, the plaintiff was not challenged on
this point in cross-examination. In para 33 of the plaintiff’s AEIC, he
asserts, inter alia, as follows:
I was surprised by the unreasonably short deadline that the Defendant
gave me which contradicted what the Defendant represented to me
and agreed that I would be given the 48-Hour Grace Period to do so. I
recalled that in or about July 2008, in an official meeting in the
defendant’s office with the Defendant’s senior officers, Mr. Torsten
Linke (‘Linke’), managing director, in the presence of Ms Chin and 3
other senior officers (2 directors and 1 senior vice present) [sic] of the
Defendant, Linke promised me that the Defendant would grant me a
grace period of 48-hour to respond. It should be noted that the said 48-
hour grace period was not a conditional grace period (namely, no need
to undertake or promise to remit funds).

The rule in Browne v Dunn (1893) 6 R 67 would preclude the

defendant from submitting otherwise. See also Britestone Pte Ltd v
Smith & Associates Far East, Ltd [2007] 4 SLR(R) 855 at [17].
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922 SINGAPORE LAW REPORTS [2010] 2 SLR

(b) The plaintiff also referred to the promise of the 48-hour grace
period during his conversations with Cynthia Chin on 8 and
10 October 2008. Clearly the promise was not a fiction of the
plaintiff’s imagination or a “fabrication” as alleged by the defendant:

DAVID: Isn’t it at that time you all said I have 48 hours of−
CYNTHIA: Yes.
DAVID: -- grace period mah?
CYNTHIA: Yes.

(c) This was admitted as much by Cynthia Chin under cross-

examination though she sought to make an irrelevant distinction
between granting and promising the 48-hour grace period to respond
to a margin call:
Q: Yes, and you agreed that there was this 48-hour grace period,
right?
A: That’s right.
Q: He says:
‘Then okay, that means to say you give me 48-hours for me to
reply, correct?’
…
Let’s stick just to the 48-hour grace period. You confirmed that
Mr Lam is entitled to a 48-hour grace period for a margin call;
right? In this conversation.’
A: It was an indulgence that the bank granted to Mr Lam on 48
hours.
Q: Yes, but it was granted, right, Ms Chin?
A: Granted at which point in time, but I don’t understand.
Q: Let’s not talk about the point in time, but Mr Lam was granted a
48-hour grace period by the bank; right?
A: In the past.
Q: In the past?
A: Yeah, I mean the past few days.
Q: Yes, in the past − as in the bank promised him a 48-grace period
to respond to a margin call; right, Ms Chin?
A: The bank did not promise, but the bank granted or indulged him
by granting him 48 hours to respond to the margin call.
(d) The defendant did not call Mr Linke to rebut the plaintiff’s case.
No explanation was furnished by the defendant for not calling
Mr Linke. In these circumstances, the court is entitled to draw an
adverse inference that his evidence would not be favourable to the
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 923

plaintiff on this issue: see Teng Ah Kow v Ho Sek Chiu [1993]

3 SLR(R) 43.

Was it inequitable for the defendant to enforce its strict legal rights –
detrimental reliance
63 The burden of proving detrimental reliance remains throughout on
the party raising the estoppel. In this connection, the plaintiff alleged:
(a) that he relied on the promise and cancelled his plans to remit
deposits to other banks and in fact remitted additional funds to
his account with the defendant on 12 September 2008; and
(b) that he suffered “detriment” in that he was denied more time to
restore the margin shortfall and the benefit of anticipated
favourable exchange rate over the weekend of 11 and
12 October 2008.
64 The inquiry is not simply whether the plaintiff had relied on the
promise but whether the reliance had rendered it inequitable for the
defendant to go back on its promise and to enforce its strict legal rights
under the Service Agreement.
65 For promissory estoppel, the reliance must be linked to the
“detriment”. In the present case, I agree with the defendant’s submission
that there is an obvious disconnect between the pleaded reliance and the
alleged detriment. The plaintiff alleged that he remitted additional funds to
the defendant some two to three months after the promise. However, the
plaintiff is not alleging that he suffered detriment in transferring the
additional funds. It was for the plaintiff to decide how and what he wished
to do with his deposits including the additional funds which were remitted
in September 2008. The plaintiff instead alleged that he suffered detriment
in that he was denied more time to restore the margin shortfall.
66 It is not the plaintiff’s case that if the defendant had not resiled from
its promise, he would have been ready, willing and able to deliver additional
collateral to clear the shortfall within the 48-hour grace period. If that had
been the plaintiff’s case, at least there would be a causal link and a legal
platform to mount a case on promissory estoppel. However, the plaintiff
did not pursue his case in this manner because he knew it was against the
weight of the evidence.
67 How could the plaintiff allege that it was inequitable for the defendant
to enforce its rights under the Service Agreement (which has the effect of
withdrawing the promise of the 48-hour grace period) given his own
evidence that he was unwilling and/or unable to do so even if the grace
period was extended to 72 hours up to 14 October 2008. The truth is the
plaintiff was given time to respond. His response was clear and
unequivocal:
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924 SINGAPORE LAW REPORTS [2010] 2 SLR

Q: Your response is very clear. You don’t have money; right?

A: Yes.
Q: Even if you do have money, you are not going to put it in because every
account is like an independent ship; correct?
A: Yes.
[emphasis added]
68 The plaintiff was aware and accepted that the defendant was indeed
entitled to close his FX positions on 10 October 2008:
Q: Otherwise, if the bank wants to lose off, then go ahead?
A: Yes.
Q: Close off everything, then go ahead; right?
A: Yeah, that’s what I told them. Yeah.
[emphasis added]
69 Having accepted that the defendant was entitled to close his FX
positions on 10 October 2008 and the positions were in fact closed on
10 October 2008, it would in fact be unfair for the plaintiff to now raise
promissory estoppel to challenge the validity of the margin call
transactions. This is all the more so on the facts of this case since it is the
plaintiff’s own evidence that the right to close out had accrued on 7 October
2008 and that the defendant should have done so some three days earlier.
Accordingly on the evidence before me, I find that it was not inequitable for
the plaintiff to rely on the terms of the Service Agreement to close out the
plaintiff’s FX positions on 10 October 2008.

Counterclaim
70 Following the closing out of the plaintiff’s FX positions under the
Advisory Account on 10 October 2008, a balance sum of USD1,135,239.43
is due and owing by the plaintiff to the defendant.
71 Counsel for the plaintiff accepts that if the defendant had the right to
close out the FX positions under the Advisory Account on 10 October 2008,
it follows that the defendant’s counterclaim must be allowed and I so order.

Conclusion
72 Although the action started with several pleaded causes of action,
when the present counsel for the plaintiff took over conduct, he elected to
focus on what he perceived to be the plaintiff’s “best shot”. This was
probably a sensible approach. However, the plaintiff, despite adopting a
clinical approach to his remaining case, cannot ignore the evidence before
the court. In particular, he cannot disregard his own evidence that he was
aware of the margin shortfall since 7 October 2008 and that the defendant’s
right to close out his FX positions had accrued on that day.
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[2010] 2 SLR Lam Chi Kin David v Deutsche Bank AG 925

73 By reason of the above findings, I hold that the plaintiff’s claim fails at
every level. First, at the threshold level, I find that the defendant did make a
valid margin call on 7 October 2008. On that ground alone, the plaintiff’s
claim must stand dismissed with costs. Secondly, even if the margin call was
only made on 10 October 2008 and not 7 October 2008 (contrary to my
finding), cl 2.6 of the Master Agreement did not govern the margin call and
even if it did, it would nonetheless not have assisted the plaintiff in the light
of his own unequivocal confirmation that he was unable and or unwilling to
deliver additional collateral to clear the margin shortfall even if time was
extended to 14 October 2008. Finally, and even though I found that the 48-
hour grace period was promised to the plaintiff, the case based on
promissory estoppel would suffer the same fate for the same reason given
the plaintiff’s confirmation that he would not have been able to deliver the
additional collateral even if the grace period was extended beyond the 48-
hour grace period.
74 The plaintiff’s claim is therefore dismissed with costs to be taxed. The
defendant’s counterclaim in the sum of USD1,135,239.43 is allowed
together with interest and costs.
75 As there is some overlap between the defendant’s counterclaim and
the plaintiff’s claim, I will only allow one set of costs to the defendant to be
taxed, if not agreed.

Reported by Sngeeta Devi.