Beckkett Pte Ltd v Deutsche Bank AG and Another and Another Appeal

JudgeChan Sek Keong CJ
Judgment Date27 April 2009
Neutral Citation[2009] SGCA 18
Citation[2009] SGCA 18
CourtCourt of Three Judges (Singapore)
Subject MatterCompensation and damages,Scope of duty of pledgee to pledgor and guarantor when selling pledged shares,Whether purchaser of pledged shares was bona fide purchaser,Stocks and shares,Whether sale of pledged shares involved any unlawful means,Credit and Security,Sale of pledged shares by pledgee at undervalue,Equity,Differences between conspiracy by lawful means and conspiracy by unlawful means,Remedies,Whether purchaser of pledged shares had obligation to safeguard rights of pledgor vis-a-vis pledgee,Whether shares sold at undervalue,Tort,Elements of conspiracy by unlawful means,Pledgee failing to ascertain market price of shares before agreeing to private sale,Whether purchaser of pledged shares had notice of pledgee's breach of duty to obtain best price for pledged shares or any impropriety in sale,Civil Procedure,Scope of bifurcation order,Whether claim by company in respect of shares pledged by its subsidiary allowable,Conspiracy,Whether pledgee acted in bad faith in sale of pledged shares or exercised its power of sale for improper purpose,Whether trial judge was right in awarding only nominal damages,Mortgage of personal property,Damages,Whether sale of pledged shares could be set aside,Whether pledgor who pledged shares of subsidiary had standing to set aside other shares pledged by its subsidiary and sub-subsidiaries,Rescission,Conspiracy by unlawful means,Whether there was intention on part of pledgee or purchaser to injure pledgor,Whether pledged shares sold at undervalue pursuant to conspiracy between pledgee and purchaser,Proper basis for valuation of shares,Whether value of shares of company affected by value of shares of its subsidiary and sub-subsidiaries,Whether bifurcation order required pledgor to prove actual loss at trial,Whether principle of no reflective loss applied,Bifurcation order
Plaintiff CounselK Shanmugam SC, Ang Cheng Hock, William Ong, Loong Tse Chuan, Vikram Nair and Tay Yong Seng (Allen & Gledhill LLP),Sundaresh Menon SC, Ronald Choo, Aurill Kam, Sim Kwan Kiat, Dawn Tan, Kelvin Poon, Tammy Low and Paul Tan (Rajah & Tann LLP)
Defendant CounselKenneth Tan SC and Soh Wei Chi (Kenneth Tan Partnership) and Ng Soon Kai (Ng Chong & Hue LLC)
Published date05 May 2009

27 April 2009

Judgment reserved.

Chan Sek Keong CJ (delivering the judgment of the court):


1 The proceedings before us are an appeal (Civil Appeal No 125 of 2007) by Beckkett Pte Ltd (“Beckkett”), a Singapore company, and a cross-appeal (Civil Appeal No 126 of 2007) by Deutsche Bank AG (“the Bank”), a German bank with a branch in Singapore, against the decisions of Kan Ting Chiu J (“the Judge”) on a claim by Beckkett and a counterclaim by the Bank in Suit No 326 of 2004 (see Beckkett Pte Ltd v Deutsche Bank AG [2008] 2 SLR 189 (“the Judgment”)). The Judge dismissed both the claim and the counterclaim.

2 The claim by Beckkett is for various reliefs against the Bank and PT Dianlia Setyamukti (“DSM”), an Indonesian company, in connection with the sale by the Bank to DSM of shares in four Indonesian companies which were pledged to the Bank (“the Pledged Shares”) to secure the repayment of a bridging loan of US$100m made by the Bank (“the Bridging Loan”) to PT Asminco Bara Utama (“Asminco”), an Indonesian company. The Bridging Loan was guaranteed by Beckkett, its ultimate parent company. The counterclaim by the Bank is against Beckkett as guarantor for payment of the unpaid balance of the Bridging Loan after accounting for the proceeds of sale of the Pledged Shares.

The background

The Swabara group of companies

3 Beckkett is an investment holding company incorporated in Singapore. Prior to February 2002, Beckkett owned approximately 74.2% of the issued share capital of an Indonesian company, PT Swabara Mining and Energy (“SME”). SME, in turn, owned 99.9% of the share capital of Asminco which owned 40% of the shares in PT Adaro Indonesia (“Adaro”), an Indonesian company, and 40% of the shares in PT Indonesia Bulk Terminal (“IBT”), an Indonesian company. Beckkett and these four Indonesian companies are collectively referred to in this judgment as “the Swabara Group”. The main and most substantial asset in the Swabara Group was the indirect holding (through Asminco) of a 40% share in Adaro. Adaro owned a coal mine in Kalimantan (one of the largest in Indonesia) which produced a low-ash, low-energy coal known as “Envirocoal”. This asset was the “crown jewel” of the Swabara Group. IBT owned and operated a bulk terminal for Adaro’s coal mine.

4 Beckkett itself is a wholly-owned subsidiary of Asian Mining Energy Corporation (“ASMEC”), a company incorporated in Mauritius whose shareholders were divided into three groups as follows:

(a) Metropolitan Investment Corporation (“MIC”) owning 29.191% of its shares;

(b) PT Unigaruda Masabadi (“UM”), owning 29.191% of its shares; and

(c) Indopac Development Corporation Ltd (“Indopac”), Timko Company Ltd (“Timko”) and Jade Age International Corporation (“Jade Age”), collectively owning 41.618% of its shares.

5 MIC was part of the group of companies called “the Tirtamas Group”, owned and controlled by Mr Hashim Djojhadikusumo (“Hashim”) while UM was part of another group of companies called “the RGM Group”, owned and controlled by Mr Sukanto Tanoto (“Sukanto”). MIC and UM will be referred to collectively as “the Passive Shareholders”. Together they owned 58.382% of ASMEC and thus controlled Beckkett.

6 Indopac, Timko and Jade Age, on the other hand, were companies controlled by a group of four individuals who also held various management positions in the Swabara Group. These four individuals are:

(a) Graeme Robertson – Chairman, Chief Executive Officer and President Director of SME, Asminco, Adaro and IBT, as well as the managing director of New Hope Corporation Limited (“New Hope”) which is also a shareholder of Adaro, and sole executive director of Indocoal Pty Ltd;

(b) Allan Buckler – Chief Operations Officer and director of SME, Adaro, IBT, as well as Chief Operations Officer and director of New Hope;

(c) Terry Smith – Deputy Operations Director and Commissioner of SME, Adaro and IBT, as well as Operations Officer and director of New Hope; and

(d) Indra Aman – General Legal Counsel and director of SME and Adaro, as well as President Commissioner of Asminco.

The four individuals are collectively referred to as “the Management Group” in this judgment.

The Bridging Loan and the share pledge agreements

7 Prior to 1997, Asminco owned 15% of the shares in Adaro and 20% of the shares in IBT. In December 1997, Asminco acquired a further 25% of Adaro shares and 10% of IBT shares from the Tirtamas Group and another 10% of IBT shares from a company called Swabara Bumi. Asminco obtained the Bridging Loan from the Bank to fund the purchase. The Bridging Loan was provided subject to the terms of a bridge facility agreement dated 24 October 1997. The Bridging Loan was intended to be repaid in six months from the proceeds of a syndicated loan and a convertible bond to be arranged by Deutsche Morgan Grenfell, but subject to market circumstances and on a “best efforts” basis.

8 The following securities were given by the Swabara Group to secure the repayment of the Bridging Loan:

(a) the joint and several guarantee of Beckkett and SME (“the Guarantee”); and

(b) the Pledged Shares comprising: (i) Beckkett’s 74.2% shareholding in SME (“the SME Shares”); (ii) SME’s 99.9% shareholding in Asminco (“the Asminco Shares”); (iii) Asminco’s 40% shareholding in Adaro (“the Adaro Shares”); and (iv) Asminco’s 40% shareholding in IBT (“the IBT Shares”), each pledge being subject to a separate share pledge agreement (collectively “the SP Agreements”) containing identical terms and conditions.

Beckkett was both a pledgor of the SME Shares and a guarantor to secure the repayment of the Bridging Loan. The Guarantee is governed by English law, while all the SP Agreements are governed by Indonesian law.

9 The Bridging Loan was disbursed in October 1997 and used to pay off a US$16.5m loan extended by Sukanto to ASMEC, and the remaining $83.5m was used to acquire the additional 25% shareholding in Adaro and the 20% shareholding in IBT (see [7] above).

10 Asminco defaulted in repaying the Bridging Loan when it became due in May 1998. The Bank agreed to roll over the Bridging Loan for three months to enable Asminco to obtain alternative financing, but Asminco defaulted again. Thereafter, Asminco remained in default, and for about three years from August 1998 to June 2001, Beckkett was either unable or unwilling to repay the Bridging Loan. During this period, the Bank made numerous efforts to refinance and restructure the Bridging Loan. It held at least 19 restructuring meetings with the Management Group, but without success. The Bank also made two refinancing proposals on 2 December 1998 and 19 April 1999 but these were rejected by Beckkett. In January 2000, the Bank sought partial repayment of the Bridging Loan and also a proposal from Beckkett on how to repay the balance, but this attempt was also ignored. According to the Bank (and Beckkett has not denied this), the shareholders of Beckkett refused to provide Asminco with funds to repay the Bridging Loan and refused to agree to sell the Pledged Shares or to obtain refinancing from third parties to repay the Bridging Loan.[note: 1]

The sale of the Pledged Shares

11 The impasse came to a head at a meeting on 27 June 2001 when the Bank informed Beckkett’s shareholders that, unless they put in money to repay the Bridging Loan or voluntarily gave up their shares, the Bank would have to take action to enforce the security. As Beckkett remained intransigent, the Bank entered into negotiations to sell the Pledged Shares to DSM. Beckkett was deliberately kept in the dark about the negotiations. On 21 November 2001, the Bank and DSM agreed to the sale and purchase of the Pledged Shares at about US$46m on the terms of a sale and enforcement agreement governed by Singapore law (“the S&E Agreement”). The sale price was allocated among the Pledged Shares as follows:

(a) US$800,000 for the SME Shares;

(b) US$44.2m for the Adaro Shares;

(c) US$1m for the IBT Shares; and

(d) US$100 for the Asminco Shares.

12 The sale was completed on 15 February 2002 and the Pledged Shares were transferred to DSM and its nominees as follows:

(a) the Adaro Shares and the IBT Shares to DSM;

(b) the SME Shares to PT Mulhendi Sentosa (“Mulhendi”); and

(c) the Asminco Shares to PT Akabiluru (“Akabiluru”).

13 Beckkett was informed of the sale on 18 February 2002 when it received a letter from the Bank’s Indonesian lawyers disclosing the sale of the SME Shares for US$800,000. That notification was followed on 14 March 2002 by a letter from the Bank’s Singapore solicitors demanding payment from Beckkett of US$86,888,969.31, being the balance of the Bridging Loan and interest thereon (“the Unpaid Loan”) as at 21 February 2002. Apart from the name of the purchaser of the SME Shares and the price at which the SME Shares were sold, Beckkett was not provided with any other details on the sale of the Pledged Shares. Beckkett had to commence pre-action discovery proceedings in May 2002 against the Bank before it was eventually given the details of the sale of the Pledged Shares. These are not the only unusual features in the case. For example, there is no evidence before the court as to whether the Bank had obtained a valuation of the further 25% Adaro shares and 20% IBT shares when it provided the Bridging Loan to Asminco to finance the purchase of the shares.

14 Beckkett refused to pay the Unpaid Loan and commenced an action on 27 April 2004 against the Bank to set aside the sale of all the Pledged Shares and/or for damages for selling the Pledged Shares at an undervalue. Beckkett joined DSM as a second defendant on 28 February 2005 after obtaining information on the role of DSM in the purchase of the Pledged Shares.

15 Adaro and IBT were eventually sold to an international consortium of investors and financiers in 2005 pursuant to a US$950m leveraged buyout, which was completed sometime in June 2005. However, prior to this event, Beckkett had unsuccessfully applied to the High Court for...

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