Deutsche Bank AG Singapore Branch v Arj Holding Limited and another

ARJ Holding Limited (ARJ) banked with Deutsche Bank AG Singapore Branch (DB) under a service agreement signed on 8 April 2020, and its director and sole shareholder, Mr Juma, gave a personal guarantee. By a facility letter of 17 November 2021 DB granted loan facilities of up to US$400m. Much of the collateral consisted of two privately placed bond issues, the NR Bonds and the LS Bonds, which DB accepted at a lending value of 30% on the basis of a diversified portfolio. Through 2022 DB issued margin calls and pressed ARJ to diversify; promised transfers, including an AED20m transfer that Mr Juma cancelled and a proposed NatWest takeover of the portfolio, did not materialise, and coupon payments due on both bonds were not received.

On 15 August 2022 DB cut the bonds' collateral value from 30% to 25% and called for a shortfall of US$11,421,000. When it was not met, DB terminated the facilities on 16 August 2022, later assigned nil value to the bonds after being told they had not been fully paid for, and liquidated the portfolio. DB sued ARJ and Mr Juma in Originating Claim No 300 of 2022 for the outstanding CHF and euro loans and custody fees. The defendants said the diversification condition was never communicated, that DB breached an implied duty of good faith, and counterclaimed for losses from a sale in poor market conditions.

1. Whether DB communicated a diversification requirement, including that no security exceed 30% of the portfolio's lending value
2. Whether DB was entitled to reduce the lending value of the bonds in August 2022
3. Whether an implied term of good faith governed DB's discretion and, if so, whether DB breached it
4. Whether DB could rely on grounds for termination not known to it at the time, whether the counterclaim succeeded, and what interest applied

Mr Juma had replied "I confirm the content of your e-mail" to DB's 10 May 2021 message setting out an ongoing requirement for a diversified portfolio, and the court rejected his claim that this merely acknowledged receipt. Later correspondence, including Dr Khan's promise to restore exposure "back to permissible limits", showed ARJ knew of specific limits. An internal note of a July 2021 meeting was consistent with the record, no adverse inference arose from the absence of the departed banker, and the entire agreement clause did not bar later terms.

The cut was justified: the LS Bonds still exceeded the 30% limit and the coupons were unpaid, and nothing required DB to state the exact collateral needed. Because whether the bonds were paid for was especially within the defendants' knowledge, they bore the burden of proving it; Dr Khan's shifting evidence on waivers, payments by other entities and cryptocurrency left the court finding that the bonds were not fully paid up when transferred. Estoppel was unpleaded and unsupported.

The court implied in law a narrow term that the discretion not be exercised arbitrarily, capriciously or perversely, distinguishing the broad good faith duty rejected in Ng Giap Hon v Westcomb Securities Pte Ltd and others [2009] 3 SLR(R) 518. DB had not breached it, having waited five to six months while the NatWest transfer produced no firm commitment.

Applying CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2017] 2 SLR 940, DB could also rely on a later discovery that ARJ's FY 2020 accounts had not been audited by the named auditors and bore signatures Dr Khan said were not his. Under Beckkett Pte Ltd v Deutsche Bank AG and another and another appeal [2009] 3 SLR(R) 452 a lender need not wait for better prices, and hindsight charts did not show an undervalue. Mr Juma's guarantee covered future liabilities. Contractual interest ran post-judgment as an independent covenant, but DB was held to its pleaded rates.

The court allowed DB's claims against ARJ and Mr Juma as prayed for at Prayers 1 to 3 of the statement of claim, and dismissed the counterclaim. Contractual interest was ordered on the outstanding principal from 1 October 2022 until full payment, but not at DB's higher margin rate or on a compound basis; the statutory rate of 5.33% per annum applied post-judgment to the other sums. Costs went to DB.