Soon Kok Tiang v DBS Bank: Credit-Linked Notes, High Notes 5, Lehman Brothers Bankruptcy

Soon Kok Tiang and others, a group of 21 investors, appealed to the Court of Appeal of Singapore against DBS Bank Ltd's High Notes 5 (HN5) after Lehman Brothers' bankruptcy. The investors sought a refund of their capital. The High Court had dismissed their claim. The Court of Appeal, with Chan Sek Keong CJ delivering the judgment, dismissed the appeal, finding that the HN5 contract was not void for uncertainty, and the investors were not entitled to any payout due to the contractual terms.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding DBS High Notes 5 after Lehman Brothers bankruptcy. The court dismissed the appeal, finding the contract not void for uncertainty.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
DBS Bank LtdRespondentCorporationAppeal DismissedWon
Soon Kok Tiang and othersAppellantOtherAppeal DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeYes
Chao Hick TinJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Davinder SinghDrew & Napier LLC
Una KhngDrew & Napier LLC
Siraj OmarPremier Law LLC
Dipti JauharPremier Law LLC
Rachel Tan Swee HuaPremier Law LLC

4. Facts

  1. Appellants invested in DBS High Notes 5 (HN5).
  2. HN5 were credit-linked notes linked to a basket of reference entities.
  3. Lehman Brothers, one of the reference entities, filed for bankruptcy.
  4. The bankruptcy triggered a Credit Event under the HN5 contract.
  5. DBS Bank Ltd determined the Credit Event Redemption Amount (CERA) to be zero.
  6. Appellants claimed the HN5 contract was void for uncertainty due to inconsistent CERA descriptions.
  7. The pricing statement contained four different descriptions of the CERA.

5. Formal Citations

  1. Soon Kok Tiang and others v DBS Bank Ltd and another matter, Civil Appeal No 6 of 2011, [2011] SGCA 55
  2. Soon Kok Tiang and others v DBS Bank Ltd and another matter, , [2011] 2 SLR 716

6. Timeline

DateEvent
Base prospectus dated
Supplementary base prospectus dated
Pricing statement dated
Sale of DBS High Notes 5 launched
DBS High Notes 5 issued
Appellants received first quarterly interest payment
Appellants received fifth quarterly interest payment
Lehman Brothers filed for bankruptcy
DBS Bank Ltd informed HN5 holders of Lehman Brothers' default
DBS Bank Ltd issued a public statement regarding the Credit Event
DBS Bank Ltd informed HN5 holders that the Credit Event Redemption Amount was zero
Originating Summons No 774 of 2009 filed
High Court judgment issued ([2011] 2 SLR 716)
Respondent produced Reference Notes documents
Judgment reserved
Court of Appeal dismissed the appeal

7. Legal Issues

  1. Uncertainty in Contract Terms
    • Outcome: The court held that the HN5 contract was not void for uncertainty.
    • Category: Substantive
    • Sub-Issues:
      • Inconsistent CERA descriptions
      • Unworkable CERA formulae
      • Conceptual uncertainty
    • Related Cases:
      • [1934] 2 KB 1
      • [1934] 2 KB 17
      • [1972] 1 Ch 53
  2. Interpretation of Contractual Terms
    • Outcome: The court interpreted the contractual terms to determine the operative CERA description and the definition of Final Price.
    • Category: Substantive
    • Sub-Issues:
      • Construction of CERA descriptions
      • Definition of Final Price
      • Clerical mistake in contract
    • Related Cases:
      • [1982] 2 EGLR 111
      • [2008] SGHC 241
      • [2009] 1 AC 1101

8. Remedies Sought

  1. Refund of the entire capital sum invested in the HN5
  2. Declaration that the HN5 were void

9. Cause of Actions

  • Breach of Contract
  • Declaration that the HN5 were void

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation
  • Financial Services Litigation

11. Industries

  • Banking
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Soon Kok Tiang and others v DBS Bank Ltd and another matterHigh CourtYes[2011] 2 SLR 716SingaporeThe decision from which this appeal arose.
East v Pantiles (Plant Hire) LtdN/AYes[1982] 2 EGLR 111N/ACited for the conditions for correcting an obvious clerical mistake by the process of construction.
Ng Swee Hua v Auston International Group LtdHigh CourtYes[2008] SGHC 241SingaporeEndorsed and applied the conditions for correcting an obvious clerical mistake by the process of construction.
Chartbrook Ltd v Persimmon Homes LtdHouse of LordsYes[2009] 1 AC 1101United KingdomEndorsed and applied the conditions for correcting an obvious clerical mistake by the process of construction.
Foley v Classique Coaches, LimitedN/AYes[1934] 2 KB 1N/AReferred to in support of legal arguments on the issue of uncertainty.
May and Butcher, Limited v The KingHouse of LordsYes[1934] 2 KB 17United KingdomReferred to in support of legal arguments on the issue of uncertainty.
Brown v Gould and OthersN/AYes[1972] 1 Ch 53N/AReferred to in support of legal arguments on the issue of uncertainty.
Fawcett Properties Ltd v Buckingham County CouncilN/AYes[1961] A.C. 636N/AReferred to in support of legal arguments on the issue of uncertainty.
G Scammell and Nephew, Limited v H C and J G OustonHouse of LordsYes[1941] AC 251United KingdomContended that the threshold to be satisfied before a court would declare a contract void for uncertainty was very high.
Sudbrook Trading Estate Ltd v Eggleton and OthersHouse of LordsYes[1983] 1 AC 444United KingdomContended that the threshold for voiding a contract was even higher in the case of executed contracts.
Riddick v Thames Board Mills LtdN/AYes[1977] QB 881N/ACited for the application of the principle laid down in Riddick v Thames Board Mills Ltd [1977] QB 881 as well as the implied undertaking.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
US Bankruptcy Code (Title 11, USC)United States

15. Key Terms and Keywords

15.1 Key Terms

  • High Notes 5
  • HN5
  • Credit-linked notes
  • Reference Entities
  • Lehman Brothers
  • Credit Event
  • Credit Event Redemption Amount
  • CERA
  • Pricing Statement
  • Reference Notes
  • Constellation Investments Ltd
  • Final Price
  • Aggregate Principal Amount
  • APA

15.2 Keywords

  • High Notes 5
  • Credit-linked notes
  • Lehman Brothers
  • Bankruptcy
  • Contract Law
  • DBS Bank
  • Singapore
  • Financial Derivatives
  • CERA
  • Uncertainty
  • Investment

17. Areas of Law

Area NameRelevance Score
Structured Notes90
Credit-linked notes90
Investments80
Banking and Finance70
Financial Products70
Contract Law60
Breach of Contract60
Commercial Law50
Misrepresentation40
Agency Law30
Guarantee20

16. Subjects

  • Contract Law
  • Financial Derivatives
  • Structured Notes
  • Banking
  • Investment Law