Beckkett v Deutsche Bank: Duty of Pledgee, Undervalue Sale of Shares, and Conspiracy Claim
In Beckkett Pte Ltd v Deutsche Bank AG and PT Dianlia Setyamukti, the Singapore High Court addressed Beckkett's claim against Deutsche Bank for breach of duty as a pledgee and against both defendants for conspiracy related to the sale of pledged shares. Beckkett guaranteed a loan to PT Asminco Bara Utama, pledging shares in PT Swabara Mining and Energy (SME). After Asminco defaulted, Deutsche Bank sold the pledged shares to PT Dianlia Setyamukti (DSM). Beckkett alleged the shares were sold at an undervalue and that Deutsche Bank and DSM conspired to injure Beckkett. The court found Deutsche Bank liable for failing to properly discharge its duties as pledgee but awarded only nominal damages due to Beckkett's failure to prove the shares were sold at an undervalue. The conspiracy claim and Deutsche Bank's counterclaim were dismissed.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for Plaintiff in part; nominal damages awarded. Claim for conspiracy dismissed. Defendant's counterclaim dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court case concerning the duty of a pledgee to a pledgor, undervalue sale of pledged shares, and allegations of conspiracy. Beckkett's claims were largely dismissed.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Beckkett Pte Ltd | Plaintiff | Corporation | Nominal Damages Awarded | Partial | Steven Chong, Andrew Ong, Ronald Choo, Sim Kwan Kiat, Dawn Tan, Kelvin Poon, Chenthil Kumarasingam, Ian Teo, Ooi Zhao Rong |
| Deutsche Bank AG | Defendant | Corporation | Counterclaim Dismissed | Lost | K Shanmugam, Ang Cheng Hock, William Ong, Christopher Tan Teow Hin, Loong Tse Chuan, Nicholas Lum, Vikram Nair, Tay Yong Seng |
| PT Dianlia Setyamukti | Defendant | Corporation | Claim Dismissed | Won | Kenneth Tan, Soh Wei Chi, Ng Soon Kai, Toh Chen Han |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kan Ting Chiu | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Steven Chong | Rajah & Tann |
| Andrew Ong | Rajah & Tann |
| Ronald Choo | Rajah & Tann |
| Sim Kwan Kiat | Rajah & Tann |
| Dawn Tan | Rajah & Tann |
| Kelvin Poon | Rajah & Tann |
| Chenthil Kumarasingam | Rajah & Tann |
| Ian Teo | Rajah & Tann |
| Ooi Zhao Rong | Rajah & Tann |
| K Shanmugam | Allen & Gledhill |
| Ang Cheng Hock | Allen & Gledhill |
| William Ong | Allen & Gledhill |
| Christopher Tan Teow Hin | Allen & Gledhill |
| Loong Tse Chuan | Allen & Gledhill |
| Nicholas Lum | Allen & Gledhill |
| Vikram Nair | Allen & Gledhill |
| Tay Yong Seng | Allen & Gledhill |
| Kenneth Tan | Ng Chong Hue LLC |
| Soh Wei Chi | Ng Chong Hue LLC |
| Ng Soon Kai | Ng Chong Hue LLC |
| Toh Chen Han | Ng Chong Hue LLC |
4. Facts
- Deutsche Bank made a US$100m Bridging Loan to PT Asminco Bara Utama.
- Beckkett Pte Ltd guaranteed the loan and pledged its shares in SME as security.
- Asminco defaulted on the loan repayment.
- Deutsche Bank sold the pledged shares to PT Dianlia Setyamukti for US$46m.
- Beckkett alleged the shares were sold at a gross undervalue.
- Beckkett claimed Deutsche Bank failed to obtain a proper valuation of the shares.
- Beckkett alleged a conspiracy between Deutsche Bank and DSM to injure Beckkett.
5. Formal Citations
- Beckkett Pte Ltd v Deutsche Bank AG and Another, Suit 326/2004, [2007] SGHC 153
6. Timeline
| Date | Event |
|---|---|
| Bridge Facility Agreement signed between Deutsche Bank and PT Asminco Bara Utama. | |
| Asminco acquired additional shares in Adaro and IBT. | |
| Asminco defaulted on the repayment of the Bridging Loan. | |
| Share sale agreement signed between Deutsche Bank and PT Dianlia Setyamukti. | |
| Deutsche Bank obtained a ruling from the District Court of South Jakarta to sell the SME shares. | |
| Deutsche Bank entered into an agreement with Mulhendi for the sale of Beckkett’s Pledged Shares in SME. | |
| Beckkett received notice of the sale from Deutsche Bank. | |
| Deutsche Bank informed Asminco of the sale of the Pledged Shares and demanded payment. | |
| Deutsche Bank's solicitors demanded payment from Beckkett under the guarantee. | |
| Action taken out against Deutsche Bank. | |
| DSM joined as the second defendant. | |
| Jakarta High Court revoked the orders of the South Jakarta District Court. | |
| Supreme Court confirmed the ruling of the High Court. |
7. Legal Issues
- Duty of Pledgee
- Outcome: The court found that Deutsche Bank failed to properly discharge its duties as pledgee.
- Category: Substantive
- Sub-Issues:
- Failure to ascertain market price
- Sale at undervalue
- Failure to act in good faith
- Related Cases:
- [1997] 2 SLR 713
- Undervalue Sale of Shares
- Outcome: The court found that Beckkett failed to prove that the shares were sold at an undervalue.
- Category: Substantive
- Sub-Issues:
- Proper basis for valuation
- Proof of undervalue
- Conspiracy
- Outcome: The court dismissed Beckkett's claim for conspiracy against Deutsche Bank and DSM.
- Category: Substantive
- Sub-Issues:
- Conspiracy by lawful means
- Conspiracy by unlawful means
- Intention to injure
- Reflective Loss
- Outcome: The court considered the principle of reflective loss in relation to Beckkett's claim.
- Category: Substantive
8. Remedies Sought
- Declaration that the sales of the Pledged Shares are invalid
- Restoration of equity of redemption over the Pledged Shares
- Order that Deutsche Bank and DSM return the Pledged Shares
- Damages to be assessed
9. Cause of Actions
- Breach of Duty
- Conspiracy
10. Practice Areas
- Commercial Litigation
- Banking Law
- Insolvency Law
11. Industries
- Finance
- Mining
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lee Nyet Khiong v Lee Nyet Yun Janet | Court of Appeal | Yes | [1997] 2 SLR 713 | Singapore | Cited for the principle that a mortgagee exercising a power of sale has a duty to act in good faith and to take reasonable care to obtain the true market value or the proper price for the property. |
| The Bank of East Asia Ltd v Tan Chin Mong Holdings (S) Pte Ltd and Ors | High Court | Yes | [2001] 2 SLR 193 | Singapore | Cited for the principle that the mortgagee owed the duty not only to the mortgagor but to the surety as well. |
| Beckkett Pte Ltd v Deutsche Bank Aktiengesellschaft Singapore Branch | High Court | Yes | [2003] 1 SLR 321 | Singapore | Cited for the principle that where there is a guarantor, the duty extends to him as he has an interest in the sale as he is also liable for the debt remaining after the sale. |
| Standard Chartered Bank Ltd v Walker | Court of Appeal of England | Yes | [1982] 3 All ER 938 | England | Cited for the principle that if the mortgagee or the receiver have not used reasonable care to realise the assets to the best advantage, then the mortgagor, the company, and the guarantor are entitled in equity to an allowance. |
| American Express International Banking Corp v Hurley | English High Court | Yes | [1985] 3 All ER 564 | England | Cited for the proposition that the mortgagee when selling mortgaged property is under a duty to a guarantor of the mortgagor’s debt to take reasonable care in all the circumstances of the case to obtain the true market value of that property. |
| Barclays Bank Plc v Kingston | High Court of England | Yes | [2006] 2 Ll LR 59 | England | Cited for the principle that the creditor owes the guarantor, as well as the principal debtor, a duty, if he realises a security for the liabilities of the principal debtor, to do so at a proper price. |
| Cuckmere Brick Co Ltd v Mutual Finance Ltd | Court of Appeal | Yes | [1971] Ch 949 | England | Cited for the principle that a mortgagee has a duty to act in good faith and to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. |
| China and South Sea Bank v Tan Soon Gin George | Privy Council | Yes | [1990] 1 AC 536 | N/A | Cited to argue against the existence of a general common law duty of care imposed on a mortgagee exercising a power of sale. |
| Downsview Nominees Ltd v First City Corp Ltd | Privy Council | Yes | [1993] AC 295 | N/A | Cited to argue against the existence of a general common law duty of care imposed on a mortgagee exercising a power of sale. |
| AIB Finance v Debtors | Court of Appeal | Yes | [1998] 2 All ER 929 | England | Cited to argue that the duty of a mortgagee is equitable in nature, not tortious. |
| Medforth v Black | N/A | Yes | [2000] Ch 86 | England | Cited to support the view that there is no difference between the duties owed by a receiver managing a mortgaged property under common law and equity. |
| Good Property Land Development Pte Ltd v Societe General | N/A | Yes | [1989] SLR 229 | Singapore | Cited to argue that proof of undervalue is a necessary element of any claim against a mortgagee. |
| Kian Choon Investments (Pte) Ltd v Societe Generale and Anor | N/A | Yes | [1990] SLR 167 | Singapore | Cited to affirm the duties of a vendor-mortgagee to act in good faith and take reasonable steps to obtain the best price available. |
| Gerber Garment Technology Inc v Lectra Systems Ltd | English Court of Appeal | Yes | [1997] RPC 443 | England | Cited for the 'no reflective loss' principle, stating that each company is a separate legal entity and a parent company must prove its own financial loss. |
| Johnson v Gore Wood & Co | House of Lords | Yes | [2002] 2 AC 1 | England | Cited for the principle of reflective loss, stating that a claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished. |
| Townsing Henry George v Jenton Overseas Investment Pte Ltd (in liquidation) | Court of Appeal | Yes | [2007] 2 SLR 597 | Singapore | Cited for the principle of reflective loss and the possibility of taking measures to render the principle inapplicable. |
| Quah Kay Tee v Ong & Co Pte Ltd | Court of Appeal | Yes | [1997] 1 SLR 390 | Singapore | Cited for the definition of the tort of conspiracy, including conspiracy by unlawful means and conspiracy by lawful means. |
| Kuwait Oil Tanker Co SAK & Anor v Al Bader & Ors | N/A | Yes | [2000] 2 All ER (Comm) 271 | England | Cited to clarify the distinction between unlawful means conspiracy and conspiracy by lawful means, particularly regarding the intention to injure. |
| Douglas & Ors v Hello! Ltd & Ors | House of Lords | Yes | [2007] UKHL 21 | England | Cited to explain the 'injure' element and the 'intention' element in conspiracy claims. |
| Crofter Hand Woven Harris Tweed Co Ltd v Veitch & Anor | N/A | Yes | [1942] AC 435 | N/A | Cited to explain that to constitute the intention to injure by unlawful means, each party must have the objective to cause injury, although the objective may be driven by different interests. |
| Lonrho Ltd and Another v Shell Petroleum Co Ltd and another (No.2) | N/A | Yes | [1982] AC 173 | N/A | Cited for the principle that the gist of the cause of action of conspiracy is damage to the plaintiff. |
| Quinn v Leathem | N/A | Yes | [1901] AC 495 | N/A | Cited for the definition of conspiracy as an unlawful combination of two or more persons to do that which is contrary to law, or to do that which is wrongful and harmful towards another person. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Indonesian Civil Code Article 1155 | Indonesia |
| Indonesian Civil Code Article 1156 | Indonesia |
15. Key Terms and Keywords
15.1 Key Terms
- Pledged Shares
- Bridging Loan
- Share Pledge Agreement
- Equity of Redemption
- Undervalue
- Conspiracy
- Mortgagee's Duty
- Guarantor
- Penetapan
- Reflective Loss
15.2 Keywords
- Pledge
- Mortgage
- Shares
- Undervalue
- Conspiracy
- Duty of Care
- Guarantee
- Nominal Damages
- Singapore
- High Court
16. Subjects
- Banking
- Finance
- Pledge Agreements
- Mortgages
- Securities
- Civil Litigation
17. Areas of Law
- Credit and Security
- Mortgage of personal property
- Stocks and shares
- Pledge Law
- Tort
- Conspiracy
- Damages
- Company Law