In February, Mr Lam was ordered to pay Deutsche Bank in Singapore an outstanding US$1.1 million ($1.4 million) after the bank closed out his foreign exchange positions at the height of the financial crisis in October 2008.

Retired lawyer wins appeal against bank

Plaintiff claimed that he had not authorised bank to close forex positions

Zul Othman

zul@mediacorp.com.sg

SINGAPORE

In the judgement released yesterday, Chief Justice Chan Sek Keong said, since the foreign exchange market could be extremely volatile, a 48-hour grace period was a valuable right to a sophisticated customer like Mr David Lam Chi Kin, 60.

It would give him more time to decide what to do next when a margin call — which is when the collateral falls below a certain level — was made.

Without this grace period, Mr Lam might not have exposed himself to such large foreign exchange contracts.

In February, Mr Lam was ordered to pay Deutsche Bank in Singapore an outstanding US$1.1 million ($1.4 million) after the bank closed out his foreign exchange positions at the height of the financial crisis in October 2008.

Mr Lam had said in his lawsuit the bank was wrong to have made margin-call transactions on Oct 10, 2008, as he was entitled to a 48-hour grace period.

Mr Lam, who came to Singapore in 1994, had opened a private banking account with Deutsche Bank in November 2007 that allowed him to trade in foreign exchange options.

By September 2008, he had moved deposits of NZ$120 million ($118 million) and US$3 million into the account.

Mr Lam also borrowed 4.2 billion yen ($65.4 million) and 36 million Swiss francs ($47.2 million) from the bank.

On Oct 10 that year, the bank made a margin call to Mr Lam by fax, asking him to take immediate steps to restore a shortfall of US$5.5 million between his collateral value and total exposure by 5pm that day.

Mr Lam claims that he had asked the bank to refrain from closing his foreign exchange positions but the bank disagreed and closed out all his positions.

Three days later, Mr Lam was informed by the bank that a sum of US$1.1 million was outstanding after the margin-call transactions, a transaction he claimed he did not authorise.

He later claimed in his lawsuit that the bank’s managing director agreed in July 2008 to grant him a 48-hour grace period to respond to a margin call.

Yesterday, Chief Justice Chan ordered that Mr Lam’s claim for damages be remitted for assessment by the Registrar as the bank was only entitled to close out the foreign exchange positions on Oct 13, 2008 at the earliest.— The Court of Appeal has allowed the appeal of a retired lawyer who sued a bank for supposedly reneging on an agreement regarding his foreign exchange account.