UniCredit Bank AG v Glencore Singapore Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ,Judith Prakash JCA,Belinda Ang Saw Ean JCA
• Judgment Date: 28 November 2023
• Docket Number: Civil Appeal No 9 of 2023
• Court: Court of Appeal (Singapore)

UniCredit Bank AG

and

Glencore Singapore Pte Ltd

[2023] SGCA 41

Sundaresh Menon CJ, Judith Prakash JCA and Belinda Ang Saw Ean JCA

Civil Appeal No 9 of 2023

Court of Appeal

Bills of Exchange and Other Negotiable Instruments — Letter of credit transaction — Fraud exception — Juridical basis for fraud exception being different from that of tort of deceit

Tort — Misrepresentation — Fraud and deceit — Whether representation had been made when party presented letter of indemnity for payment under letter of credit

Tort — Misrepresentation — Fraud and deceit — Whether there was fraudulent intention on part of party that presented letter of indemnity for payment under letter of credit

Held, dismissing the appeal:

(1) The juridical basis of the tort of deceit was different from the fraud exception to the principle of autonomy of a letter of credit. While both were concerned with fraud, the former dealt with vindicating the right not to be lied to, which was premised on parties' private interests. The fraud exception, however, was founded on public policy which was, as per Lord Diplock in United City Merchants (Investments) Ltd v Royal Bank of Canada[1983] 1 AC 168, an application of the maxim ex turpi causa non oritur actio, or if plain English was preferred: “fraud unravels all”. The rationale for this juridical basis for the fraud exception was the courts' refusal to allow their process to be used by a dishonest litigant to carry out a fraud: at [16].

(2) In advancing its case on the tort of deceit in this appeal, UniCredit sought to invoke the fraud exception. This exception usually related to documents that could be forged or untrue in relation to the consignment of goods to which the documents referred. The fraud exception was typically invoked where the documents on their face appeared to be correct, but the seller might have shipped non-conforming goods or shipped no goods at all, or the bills of lading were forged or false in that they were antedated to show shipment within a stipulated shipping time specified under the credit. This exception did not apply in the present case because there was no fraud on the documents: at [44] to [52].

(3) UniCredit's cause of action in deceit was ill-founded for the following three reasons. First, UniCredit could not establish that Glencore had made the representations as alleged to UniCredit. For one, the Glencore LOI was not addressed to UniCredit. This would have made it clear to any reasonable bank in UniCredit's position, not only what the nature of that document was, but also that its contents were not directed at and promised to UniCredit. Further, when one read the Glencore LOI in its entirety, it could not be said that Glencore had impliedly represented to either UniCredit or Hin Leong that it intended to find and deliver the BLs to Hin Leong. What the Glencore LOI had contemplated was that the underlying transaction was one in which it could well be the case that no BLs were eventually delivered, and should this come to pass, Glencore had undertaken to indemnify Hin Leong against any losses. Further, it was clear that there was no fraudulent intention on Glencore's part. The “Sale and Buyback Arrangement” was an entirely legitimate transaction and not part of a larger scheme hatched by Glencore, or between Glencore and Hin Leong, to defraud UniCredit: at [53] to [63].

(4) Second, no representation, as formulated, was made by Glencore, let alone any lie told to UniCredit. The crux of UniCredit's complaint was that Glencore knew that Hin Leong was not going to ask for the BLs, because both Glencore and Hin Leong had entered into the Sale and Buyback Arrangement where title to the goods had passed to Hin Leong and back to Glencore, and so Glencore had never intended to find and surrender the BLs to Hin Leong. This argument, however, disregarded the manner in which Glencore had financed the repurchase of the goods, which demonstrated that there was always the possibility that Hin Leong would demand the BLs from Glencore: at [67] to [74].

(5) Third, the facts also demonstrated that UniCredit's loss could not be laid at Glencore's door. UniCredit had issued the November LC in Glencore's favour because it had been told by Hin Leong that the goods had remained unsold, when in truth, Hin Leong had resold the goods back to Glencore. Had UniCredit known about this, the terms on which it extended financing to Hin Leong would have been very different: at [75] to [80].

(6) Finally, there was no fraud to be found on the facts. The Sale and Buyback Arrangement was not some sham agreement forming part of a larger scheme aimed at defrauding UniCredit. Glencore had simply used well-established avenues of commercial trading and financing to its advantage. It realised that it could obtain a loan at a lower interest rate by selling the goods to a willing counterparty and having the repurchase of those goods financed by its bank, Banco Bilbao Vizcaya Argentaria. As the Judge correctly found, the structure of the transactions as a simultaneous sell and buyback was not determinative of whether the Sale Contract was a sham. More importantly, the Judge had also found that Glencore had checked that it did have title to pass to Hin Leong, which showed that it genuinely wanted to have title in time to transfer it to Hin Leong. This was therefore not a sham agreement involving the trading of fictious goods. Hin Leong too enjoyed a benefit under the Sale and Buyback Arrangement which effectively gave it a loan for the sum of roughly US$37m. The one crucial wrinkle in this entire arrangement for UniCredit was that Hin Leong had not been truthful when it applied for the November LC from UniCredit. This was only exposed when Hin Leong became insolvent and was unable to pay the sums owed to UniCredit. More importantly, the Judge held that Glencore was not privy or party to Hin Leong's lie to UniCredit. UniCredit did not appeal against this finding: at [65] and [66].

[Observation: English cases appeared to have proceeded on the assumption that by making a promise, one also represented one's intent to perform on that promise. Such statements of general principle, however, were not entirely useful and one should be slow to resort to generalisations in assessing whether there had been an implied representation of intention arising out of a promise made. The analysis of what implied representations of intention could be drawn from a promise made was a nuanced one that would ultimately turn on what had been said and the context in which it had been said. The inquiry to be undertaken was necessarily fact-centric; in ascertaining whether there was an implied intention represented in a contractual promise, one had to have recourse to the relevant circumstances and the context in which the promise was made, as well as what exactly had been promised: at [81] to [87].]

Case(s) referred to

Alexander v Texaco Inc 530 F Supp 864 (9th Cir, 1981) (refd)

ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] 3 SLR 666 (refd)

Arab Banking Corp (BSC) v Boustead Singapore Ltd [2016] 3 SLR 557 (refd)

B High House International Pte Ltd v MCDP Phoenix Services Pte Ltd [2023] SGHC 12 (refd)

Chu Said Thong v Vision Law LLC [2014] 4 SLR 375 (refd)

Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd [2023] SGCA(I) 7 (refd)

DBS Bank Ltd v Carrier Singapore (Pte) Ltd [2008] 3 SLR(R) 261; [2008] 3 SLR 261 (refd)

Dolphina, The [2012] 1 SLR 992 (refd)

Eastgate, Re; Ex parte Ward [1905] 1 KB 465 (refd)

Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] QB 159 (refd)

Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA [2018] 1 SLR 894 (refd)

Fidelity-Philadelphia Trust Co v Simpson 143 A 202 (Pa, 1928) (refd)

Hill Samuel Merchant Bank Asia Ltd v Resources Development Corp Ltd [1992] 3 SLR(R) 107; [1992] 2 SLR 967 (refd)

John Hudson & Co Ltd v Richard Oaten [1980] WL 612807 (refd)

Korea Industry Co Ltd v Andoll Ltd [1989] 2 SLR(R) 300; [1989] SLR 134 (refd)

Kuvera Resources Pte Ltd v JPMorgan Chase Bank, NA [2022] SGHC 213 (refd)

Kuvera Resources Pte Ltd v JPMorgan Chase Bank, NA [2023] 2 SLR 389, CA (refd)

National Infrastructure Development Co Ltd v Banco Santander SA [2018] 1 All ER (Comm) 156 (refd)

Ong Bee Chew v Ong Shu Lin [2019] 3 SLR 132 (refd)

Panatron Pte Ltd v Lee Cheow Lee [2001] 2 SLR(R) 435; [2001] 3 SLR 405 (refd)

Sztejn v Schroder Banking Corp (1941) 31 NYS 2d 631 (refd)

Uday Mehra v L Capital Asia Advisors [2022] 5 SLR 113 (refd)

United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 (refd)

Whittaker, ex parte; Re Shackleton (1875) LR 10 Ch App 446 (refd)

Facts

The appellant, UniCredit Bank AG (“UniCredit”), had on 22 November 2019, granted to Hin Leong Trading (Pte) Ltd (“Hin Leong”) banking facilities amounting to US$85m. This was done pursuant to a facility agreement and memorandum of pledge, as well as UniCredit's general business conditions. Hin Leong could use these facilities to obtain letters of credit to finance the purchase of oil, petroleum products and other commodities. Five days later, on 27 November 2019, Hin Leong made use of the facility arrangement and applied to UniCredit for an irrevocable letter of credit in the sum of US$37,209,550.35 to finance its purchase of 150,000mt of high-sulphur fuel oil (the “goods”) from Glencore Singapore Pte Ltd (“Glencore”). This transaction between Glencore and Hin Leong set the stage for the dispute between UniCredit and Glencore.

By a contract made on 27 November 2019 (the “Sale Contract”) Hin Leong purchased the goods shipped onboard the oil tanker “New Vision” and agreed that the discharge and delivery of the goods would be to a terminal in Singapore during the period of 18 to 25 December 2019. By a separate contract concluded at the same time, Glencore agreed to buy the goods back from...