UniCredit Bank AG v Glencore Singapore Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 28 November 2023
• Neutral Citation: [2023] SGCA 41
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 9 of 2023
• Hearing Date: 30 August 2023
• Citation: [2023] SGCA 41
• Year: 2023
• Plaintiff Counsel: Kenneth Tan SC (instructed) (Kenneth Tan Partnership), Herman Jeremiah, Koh Kia Jeng, Toh Cher Han, Hannah Chua, Stuart Ralph Lim Xiu Wu, Joie Tan Yi Xi and Ooi Shu Min (Dentons Rodyk & Davidson)
• Defendant Counsel: Chan Leng Sun SC (instructed) (Chan Leng Sun LLC), Colin Liew (instructed) (Colin Liew LLC), Jeffrey Koh and Hannah Chua (Clasis LLC)
• Subject Matter: Banking,Letters of credit,Fraud Exception,Bills of Exchange and other Negotiable Instruments,Letter of credit transaction,Contract,Misrepresentation,Fraudulent,Tort,Fraud and Deceit
• Published date: 28 November 2023

Belinda Ang Saw Ean JCA (delivering the grounds of decision of the court): Introduction

The sole dispute in this appeal was whether the judge of the General Division of the High Court (the “Judge”) had erred in dismissing the appellant’s, UniCredit Bank AG (“UniCredit”), claim in the tort of deceit. We heard the appeal on 30 August 2023. It was clear to us that UniCredit’s cause of action in deceit was ill-founded on the facts. We thus dismissed the appeal with costs to the respondent, Glencore Singapore Pte Ltd (“Glencore”). These are our full reasons.

Facts

The appellant, 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 150,000 metric tons of High-Sulphur Fuel Oil (the “goods”) from 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 Hin Leong (the “Buyback Contract”). The basic terms of the contracts were also contained in an email sent by Hin Leong to Glencore on 27 November 2019, and these two contractual deals will be referred to collectively as the “Sale and Buyback Arrangement”. One of the terms of the sale by Glencore to Hin Leong was that at 0001 hours on 2 December 2019, title to the goods would pass from Glencore to Hin Leong. There was an identical term in the contract for the sale from Hin Leong to Glencore. The upshot was that the parties agreed that title to the goods would pass from Glencore to Hin Leong at 0001 hours on 2 December 2019 and then immediately pass back to Glencore from Hin Leong.

On 27 November 2019, Hin Leong submitted to UniCredit an application for an irrevocable letter of credit to finance the Sale Contract. A request was then made by UniCredit on 28 November 2019 for documents, including the sale and purchase contracts and/or a “deal recap”. Hin Leong responded on the same day, clarifying that its application for a letter of credit was for “[u]nsold cargo”. While this was what Hin Leong had said, in truth, Hin Leong had already contracted to sell the goods back to Glencore. Hin Leong provided UniCredit with a copy of the Sale Contract but did not disclose the Buyback Contract referred to above (at [3]).

Hin Leong then submitted a revised application for an irrevocable letter of credit on 28 November 2019, and UniCredit subsequently issued an irrevocable letter of credit in favour of Glencore as beneficiary on 29 November 2019 (“the November LC”). The November LC was subject to The Uniform Customs and Practice for Documentary Credits (2007 Revision) (ICC Publication No 600). It stated that the credit thereunder would be available against the presentation of various stipulated documents such as a signed commercial invoice, and a full set of all three original bills of lading (“BLs”) issued or endorsed to the order of “UniCredit Bank AG, Singapore Branch” and marked “freight payable as per charter party”. The November LC further provided that in the event that the documents called for were unavailable at the time of presentation or negotiation, payment would be effected against the beneficiary’s commercial invoice and the beneficiary’s letter of indemnity duly signed by authorised signatory(s). Hin Leong had provided UniCredit with the format and wording of the beneficiary’s letter of indemnity for payment when it first applied for the November LC on 27 November 2019. Significantly, the addressee and recipient of the beneficiary’s letter of indemnity was Hin Leong. The format and wording of the beneficiary’s letter of indemnity were reproduced in the November LC (the “Glencore LOI”) without any amendment.

On 2 December 2019, Glencore presented the following documents to UniCredit for payment under the November LC: Glencore’s commercial invoice for the Sale Contract which was addressed to Hin Leong; and The Glencore LOI which was addressed to Hin Leong and worded in accordance with the format prescribed in the November LC.

On 3 December 2019, UniCredit informed Hin Leong that the documents under the November LC were presented and that UniCredit had determined the documents to be a complying presentation. Glencore, as the beneficiary of the November LC, in a separate arrangement with UniCredit, discounted the bill amount of US$ 37,209,550.35 and received from UniCredit a sum of US$36,997,691.57. More importantly, when UniCredit paid Glencore on 3 December 2019, it still did not know that Glencore had already bought back the goods.

After the November LC matured on 28 February 2020, UniCredit again asked Hin Leong if it had sold the goods, and if so, to provide documents relating to that sale. Hin Leong informed UniCredit that the goods remained unsold, which was untrue given that Hin Leong had on 2 December 2019 resold the goods to Glencore.

Slightly more than a month later, on 13 April 2020, UniCredit issued a notice of demand to Hin Leong, demanding repayment of, inter alia, the outstanding advances and accrued interest arising out of UniCredit’s financing of Hin Leong’s purchase of goods from Glencore. At this point, Hin Leong had requested a meeting with its bank lenders, including UniCredit. A day later, on 14 April 2020, UniCredit asked Glencore if it had the original BLs referred to in the LC. Glencore replied that it did not.

Hin Leong was placed under interim judicial management on 27 April 2020 and under judicial management on 7 August 2020. Hin Leong went into liquidation on 8 March 2021. Hin Leong’s insolvency left UniCredit without repayment from Hin Leong and without possession of the goods or the original BLs as security for Hin Leong’s indebtedness to UniCredit. UniCredit turned to Glencore for redress.

Observations

UniCredit sued Glencore on 20 October 2020 vide HC/S 1007/2020 and based its claim on multiple causes of action. They were as follows: Recission of the November LC because the Sale Contract was a sham and/or fictitious transaction. Fraud or deceit by Glencore. Conspiracy between Glencore and Hin Leong to injure UniCredit by unlawful means. Unjust enrichment. A claim under a Master Discounting Agreement dated 8 August 2014 between UniCredit and Glencore Grain Singapore Pte Ltd (which was later amalgamated into Glencore) as the terms of this agreement permitted UniCredit to seek recourse for losses suffered in specified circumstances . Breach of the Glencore LOI pursuant to the Contract (Rights of Third Parties) Act (Cap 53B) and/or common law.

The Judge dismissed all six of UniCredit’s claims. The Judge’s reasons for dismissing the various causes of action are found in UniCredit Bank AG v Glencore Singapore Pte Ltd [2022] SGHC 263 (the “HC Judgment”).

On the first cause of action (i.e. [11(a)] above), UniCredit sought recission of the November LC as well as a declaration that Glencore was liable to repay the sum of US$36,997,691.57 together with certain costs and expenses to be assessed, and an order for the repayment of the said sum. This claim for recission was premised on UniCredit’s contention that the Sale Contract was a sham. It was perceived to be a sham because of the buy-back transaction. The assertion that the Sale Contract was a sham was equally relied upon as the foundation of the claims in conspiracy by unlawful means and in the tort of deceit.

As mentioned, UniCredit’s appeal is against the Judge’s dismissal of the cause of action in the tort of deceit. As such, we will only set out the salient facts and arguments and the Judge’s analysis and reasoning in respect of the claim in the tort of deceit.

We note that UniCredit did not appeal against certain findings of fact. As appears below, these facts play an important role in this appeal. The following factual findings were not appealed against: That the Sale Contract was not a sham. The sale was of existing goods identified to be on board the New Vision and the evidence showed that Glencore had title to the goods and, at the material time, Glencore passed title to Hin Leong. The mere fact that Glencore and Hin Leong had entered into a simultaneous buy-back agreement was not determinative of whether the Sale Contract was a sham; and That the Buyback Contract or both contracts (the Sale Contract and the Buyback Contract) taken together were not sham or fictitious transactions.

In this appeal, UniCredit appeared to have blended the fraud exception to the principle of autonomy of letters of credit with the principles of the tort of deceit to establish a representation made by Glencore to UniCredit from the act of tendering of the Glencore LOI to UniCredit on 2 December 2019. This representation was the “hook” needed to advance UniCredit’s cause of action in the tort of deceit. UniCredit’s approach is curiously strained seeing that the juridical basis of the tort of deceit is different from the fraud exception to the principle of autonomy of credit. While both are concerned with fraud, the former deals with vindicating the right not to be lied to (see [53] below) which is premised on parties’ private interests (see generally Ong Bee Chew v Ong...