Court of Appeal upholds dismissal of Winson’s claim against OCBC and StanChart
Source: Business Times
Article Date: 22 Aug 2024
Author: Mia Pei
Supreme Court's upper division reaffirms earlier decision on basis that fraud exception for letters of credit had been made out.
The Court of Appeal has on Wednesday (Aug 21) reaffirmed the High Court’s decision to dismiss Winson Oil Trading’s claim against OCBC and Standard Chartered (StanChart) over a US$60.9 million payment dispute.
The energy trading company brought suits against the two banks for payment under two letters of credit (LCs) over transactions with collapsed oil trader Hin Leong Trading in 2020. Its claim was dismissed by the High Court in August last year on the basis of “fraud exception”.
The court said that Winson had prepared its letters of indemnity (LOIs) to the banks for payment under LCs based on forged bills of lading (BLs), knowingly or without belief in its truth. This includes cases where the company was reckless in the sense of being indifferent to the truth of a false representation.
The upper division of the Supreme Court dismissed Winson’s appeals as it upheld the “fraud exception” basis, given the invalidity of the BLs and Winson’s recklessness in responding to the “red flags”.
Several alarming signs had arisen but were ignored by Winson, such as the lack of loading documents and Hin Leong’s inability to produce the original BLs.
Winson claimed to have sold gasoil to Hin Leong in transactions which the banks had purportedly issued LCs for.
The shipped cargo was said to comprise 785,997 barrels of diesel on board the Ocean Voyager and 786,022 barrels of the same diesel on board the Ocean Taipan.
Hin Leong had, however, sold the same cargo to more than one party for its own financing purposes, by discounting sales invoices or negotiating LCs, before repaying the banks.
As a result, the BLs were signed by a staff member of Hin Leong in a structured scheme to sell cargo that had already been sold, and then to buy the cargo back from a subsequent buyer to obtain funds.
This rendered the BLs that Winson used to base its LCs, and subsequent claims on, invalid.
The Court of Appeal noted that circular trades were pre-structured given the forged BLs, and Winson accepted that it became aware of this circular structure by Apr 3, 2020. However, the judge highlighted that while all parties of the LOIs were based in Singapore, no further inquiries were made by Winson to address the “red flags”.
The case can be traced back to June 2020, when Winson sued OCBC and StanChart for failing to pay US$30.4 million each from the respective LCs they issued to finance the diesel trade for Hin Leong. This followed the collapse of Hin Leong on Apr 17, 2020.
The Singapore oil trader’s bankruptcy filing, after its founder Lim Oon Kuin – also known as OK Lim – admitted that the company hid millions in losses and unloaded fuel pledged for loans, marked one of the largest collapses of an oil trading firm in the world.
Some 23 banks, including OCBC, are owed almost US$4 billion by the trader as at its bankruptcy.
Source: Business Times © SPH Media Limited. Permission required for reproduction.
Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another appeal [2024] SGCA 31
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