WINSON OIL TRADING PTE. LTD. v Oversea-Chinese Banking Corporation Limited

[2024] SGCA 31 Court of Appeal 21 August 2024 • CA/CA 41/2023|CA/CA 40/2023 • 80 min read

26 cases cited (19 SG, 7 foreign)

Outcome

Appeal dismissed

we dismiss the appeals on the basis that the court below did not err in finding that Fraud Exception has been made out.

Source: [2024] SGCA 31, Court of Appeal, decided 21 August 2024. Read directly from the judgment.

Key facts

Court	Court of Appeal
Decided	21 August 2024
Judges	Belinda Ang Saw Ean, Steven Chong, Sundaresh Menon
Charges / claim	Bills of Exchange and Other Negotiable Instruments
Outcome	Appeal dismissed
Counsel	Kenneth Tan Partnership, Omni Law LLC, Oon & Bazul LLP, Shook Lin & Bok LLP, WongPartnership LLP, Bazul Ashhab bin Abdul Kader, Caleb Tan Jia Chween, Daryl Cheng On Lun, Felicia Soong Wanyi, Hudson Wong, Kenneth Tan, Kirsten Siow, Levin Lin Yok Yan, Lua Jing Ing Priscilla, Manoj Pillay Sandrasegara, Oommen Mathew, Prakaash s/o Paniar Silvam, Sarjit Singh Gill, See Wern Hao, Soon Wen Qi Andrea, Suresh Viswanath, Tan Chee Meng, Tan Kai Yun

Source: [2024] SGCA 31, Court of Appeal, decided 21 August 2024 — eLitigation. Updated 25 June 2026.

Catchwords

Bills of Exchange and Other Negotiable Instruments — Letter of credit transaction — Fraud exception Bills of Exchange and Other Negotiable Instruments — Letter of credit transaction — Nullity exception

Practice Areas

Bills of Exchange and Other Negotiable Instruments

Judges (3)

Belinda Ang Saw Ean Coram Steven Chong Delivered Sundaresh Menon Coram

Counsel (23)

Kenneth Tan Partnership Firm Omni Law LLC Firm Oon & Bazul LLP Firm Shook Lin & Bok LLP Firm WongPartnership LLP Firm Bazul Ashhab bin Abdul Kader Counsel Appellant Caleb Tan Jia Chween Counsel Appellant Daryl Cheng On Lun Counsel Respondent Felicia Soong Wanyi Counsel Respondent Hudson Wong Counsel Respondent Kenneth Tan Counsel Appellant Kirsten Siow Counsel Appellant Levin Lin Yok Yan Counsel Appellant Lua Jing Ing Priscilla Counsel Appellant Manoj Pillay Sandrasegara Counsel Respondent Oommen Mathew Counsel Appellant Prakaash s/o Paniar Silvam Counsel Appellant Sarjit Singh Gill Counsel Respondent See Wern Hao Counsel Appellant Soon Wen Qi Andrea Counsel Respondent Suresh Viswanath Counsel Respondent Tan Chee Meng Counsel Respondent Tan Kai Yun Counsel Respondent

Parties (3)

Oversea-Chinese Banking Corporation Limited Respondent Standard Chartered Bank (Singapore) Limited Respondent Winson Oil Trading Pte Ltd Appellant

Case Significance

Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another appeal [2024] SGCA 31 was decided by the Court of Appeal of the Republic of Singapore in Civil Appeal No 40 of 2023 and Civil Appeal No 41 of 2023, with Steven Chong JCA delivering the judgment of the court, sitting with Sundaresh Menon CJ and Belinda Ang Saw Ean JCA. The matter was heard on 28 June 2024 with judgment reserved and delivered on 21 August 2024. The appellant in both appeals was Winson Oil Trading Pte Ltd; the respondent in Civil Appeal No 40 of 2023 (arising from Suit No 463 of 2020) was Oversea-Chinese Banking Corporation Limited, and the respondent in Civil Appeal No 41 of 2023 (arising from Suit No 474 of 2020) was Standard Chartered Bank (Singapore) Limited.

As framed in the judgment, letters of credit have been described as the lifeblood of commerce, and the law developed the autonomy principle to insulate the strict payment obligation under letters of credit from disputes arising from the underlying sale contracts, the only exception being fraud on the rationale that fraud unravels all. The principal legal question in the two appeals was whether the Fraud Exception for letters of credit transactions should bear a higher threshold beyond the standard applicable for other financial instruments. The catchwords identify the issues as the fraud exception and the nullity exception in letter of credit transactions; the statutes noted include the Evidence Act and the Securities and Futures Act. Counsel for the appellant included Kenneth Tan, Bazul Ashhab bin Abdul Kader and Oommen Mathew of Kenneth Tan Partnership, Oon & Bazul LLP and Omni Law LLC, while Shook Lin & Bok LLP and WongPartnership LLP, including Tan Chee Meng and Sarjit Singh Gill, acted for the respondents.

Summary

SUPREME COURT OF SINGAPORE

21 August 2024

Case summary

Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corporation Limited and another appeal

Court of Appeal – Civil Appeal No 40 of 2023 and No 41 of 2023 [2024] SGCA 31

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Decision of the Court of Appeal (delivered by Justice Steven Chong):

Outcome: The Court of Appeal affirmed the High Court’s decision to dismiss the appellant’s claim against the respondents for payment of sums under two letters of credit issued by the respondents, on the basis that the fraud exception for letters of credit had been made out.

Pertinent and significant points of the judgment

• The Fraud Exception for letters of credit may be engaged if, in presenting documents for payment, a beneficiary makes a false representation knowingly, or without belief in its truth (which includes the beneficiary being reckless in the sense of being indifferent to the truth).

Background to the appeal and the material facts

1 The appellant, Winson Oil Trading Pte Ltd (“Winson”) is a Singapore company operating as an energy trading company involved in the business of oil trading, bunkering, and supply chain services. The respondent in CA/CA 40/2024 (“CA 40”) and CA/CA 41/2024 (“CA 41”) are Oversea-Chinese Banking Corporation Limited (“OCBC”) and Standard Chartered Bank (Singapore) Limited (“SCB”) respectively.

2 On 27 March 2020, at 2.54pm, Hin Leong Trading (Pte) Ltd (“Hin Leong”) sold to Trafigura Pte Ltd (“Trafigura”) two shipments of gasoil at a price of Mean of Platts Singapore (“MOPS”) for gasoil 10ppm, plus a premium of US$2.30 per barrel. At 3.19pm, Trafigura sold to Winson the same quantity of gasoil at MOPS plus US$2.35 per barrel. At 5.10pm, Winson sold to Hin Leong the same quantity of gasoil at MOPS plus US$2.35 per barrel (the “Winson – Hin Leong sale”) (collectively, the “Subject Transactions”).

3 SCB and OCBC each issued to Winson a letter of credit on the application of Hin Leong in favour of Winson on 2 April 2020 and 6 April 2020 respectively. Each letter of credit was to finance Hin Leong’s purchase of each of the two shipments of gasoil from Winson under the contract for the Winson – Hin Leong sale.

4 Winson made its first presentation to OCBC under a Letter of Indemnity (“LOI”) for the Ocean Voyager on 7 April 2020, and its first presentation to SCB under an LOI for the Ocean Taipan on 9 April 2020. On 15 April 2020, OCBC rejected Winson’s first presentation on the basis that there was no physical cargo that was shipped on the Ocean Voyager. The next day, Winson made its second presentation to OCBC for the Ocean Taipan instead. On 21 April 2020, Winson emailed OCBC to explain that the second presentation for a different vessel was because of an internal mix-up. On that same day, Winson made its second presentation to SCB for the Ocean Voyager.

5 SCB and OCBC refused to pay under the letters of credit. Winson brought two suits against OCBC and SCB for payment of the sums under the letters of credit. In the court below, the High Court judge (the “Judge”) dismissed Winson’s claim against OCBC and SCB on the basis that the Fraud Exception had been made out. Winson appealed against the Judge’s decision in CA 40 and CA 41.

Decision of the court

The formulation of the fraud exception

6 The court made a few observations about common law fraud in Derry v Peek. First, recklessness as a category of fraud in Derry v Peek does not entail the existence of any duty of care. Second, recklessness in the Derry v Peek sense is subjective, and refers to an indifference to a risk which the defendant is actually conscious of. Third, recklessness in Derry v Peek is an instance of having no belief in the truth of the false representation. A person who is reckless cannot be said to have an honest belief in the truth of his representation. The court therefore disagreed with the SICC’s analysis in Credit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suit [2022] 4 SLR 1 which held that recklessness in Derry v Peek would not engage the fraud exception, but that a person with no belief in the truth of his representation would: at [35] to [43].

7 The Court of Appeal in Arab Banking Corp (B.S.C.) v Boustead Singapore Ltd [2016] 3 SLR 557 and the English courts have applied the test for common law fraud in Derry v Peek in the context of the fraud exception for independent guarantees. While there are differences in the operation of independent guarantees and letters of credit, the standard for fraud in the context of the fraud exception for letters of credit should be the same on the basis of principle, precedent and policy: at [45] to [61].

Admission of the disputed evidence

8 There were three pieces of evidence which Winson argued could not be properly admitted as they were hearsay. The first disputed evidence was the “Freddy Statements”, which were statements of Mr Freddy Tan (“Freddy”), an employee from Hin Leong, and which included an admission that he signed bills of lading (“BLs”) instead of the carrier or the master of the vessel. The statements were recorded by Hin Leong’s interim judicial managers (“IJMs”). The evidence was admissible because they were part of the IJM’s statements and records in the performance of their duties as IJMs. They were also admissible because they were made against Freddy’s own interest: at [64] to [70].

9 The second disputed evidence was correspondence from Ocean Tankers (Pte) Ltd (“Ocean Tankers”)’s liquidators’ solicitors stating that Ocean Tankers, which owned the Ocean Voyager and Ocean Taipan, did not issue the BL in respect of the Ocean Voyager for the Subject Transactions. The evidence was admissible because they were made in the ordinary course of the solicitors’ profession: at [71] to [73].

10 The third disputed evidence was Mr OK Lim’s defence in a separate suit in which he stated that the cargoes on board the Ocean Taipan and Ocean Tanker were meant for Unipec Singapore Pte Ltd (“Unipec”). The evidence was inadmissible because, in its proper context, the defence was not made against Mr OK Lim’s own interest: at [74] to [76].

Winson’s representations were false

11 The representations by Winson were false. The evidence clearly showed that there were no valid BLs. Winson’s contention that the staff from Hin Leong may have been authorised to sign the BLs was entirely speculative. Moreover, the fact that the matter has been referred to the authorities also did not mean that the court could not make a finding as to whether there were valid BLs based on the evidence before the court. Winson’s argument that there was prima facie evidence that the BLs were not signed by Freddy based on the fact that the signatures in the Freddy Statements differed from that on the BLs was also bereft of any merit. Freddy knew that his signing on the BLs was irregular, and it would have made no sense to expect him to sign on the BLs using his own signature: at [78] to [80].

12 The evidence also showed that there was no cargo shipped as described in the LOIs. Winson argued that the documentation for the trade between Hin Leong and Unipec which showed that the cargoes on the Ocean Taipan and Ocean Tanker were sold to Unipec and not Winson was problematic. However, this assumed that either the Subject Transactions or the trade between Hin Leong and Unipec must be genuine. It was also telling that there was no independent inspector appointed for the purported shipments for the Subject Transactions, and Winson never received any loading documents: at [81] to [86].

Winson made the representations fraudulently

13 The multiple “red flags” that were raised and Winson’s responses to them showed that Winson was reckless and did not honestly believe in the truth of its representations. Thus, Winson cannot compel OCBC and SCB to pay under the letters of credit since the fraud exception was engaged: at [134].

14 First, the circular trades were pre-structured, although that in itself did not mean that the trades were a sham. The evidence showed that the BLs were forged which in turn showed that the Subject Transactions were pre-structured. Had it not been so, it would cause significant difficulty if any other buyer purchased the cargo and attempted to collect it.. In any event, Winson accepts that it became aware of this circular structure by 3 April 2020, two weeks before the second presentation. What was unusual about the circular trade was the use of LOIs where all parties were based in Singapore. An honest trader would have made some inquiries. Further, there was no reason why the original BL could not have been released by Ocean Tankers to Hin Leong since they shared the same office. The fact that a copy of a non-negotiable BL was available should have caused more concern because there would be no reason to explain the absence of the original BL: at [97] to [101].

15 Second, the lack of loading documents and inability to produce the original BLs was a “red flag”. By the time of the second presentation to OCBC and SCB, 16 days and 13 days had lapsed since the purported loading on the Ocean Voyager and Ocean Taipan respectively, but the original BL and loading documents remained unavailable. The fact that the cargo on the Ocean Taipan was loaded at Universal Terminal which was controlled by Hin Leong should have raised concerns about Hin Leong’s inability to produce the loading documents. This was especially alarming since OCBC had already rejected the presentation on the basis that no physical cargo had been loaded. The argument by Winson that it had been its practice to prepare documents for presentation based on copy BLs did not address the point that a “red flag” had arisen by reason of the inexplicable absence of the loading documents. Winson’s Head Trader, Mr Cai, admitted that Winson would be concerned it did not receive loading documents and Winson would “chase for the documents”, but this was not done for the Ocean Taipan and Ocean Voyager: at [102] to [108].

16 Third, the change in quantity of gasoil for the Ocean Taipan copy BL after its issuance was unusual, but Winson did not seek any explanation or documentation for this change: at [109] to [112].

17 Fourth, Ms Tung, Winson’s Executive Director, had doubts over whether the title was clean. Winson’s argument that Ms Tung’s reference to “clean title” in her WhatsApp message with Ms Ng from OCBC was a reference to whether the cargo had been resold to another party was not accepted in light of the surrounding context. Further, if the concern was genuinely about whether Hin Leong had resold the cargo, that could easily have been resolved by asking Hin Leong especially since Winson was in regular contact with Hin Leong at the material time. However, there is no evidence that Winson did so: at [113] to [118].

18 Fifth, Winson’s reaction to OCBC’s rejection of the first presentation was telling. The checks it had purportedly conducted to address the concern that there was no cargo on the vessels pursuant to the BLs were either not made out on the facts, or were incapable of addressing OCBC’s concerns in its rejection: at [119] to [131].

19 Winson argued that despite the “red flags”, a clear indication of its honest state of mind was that it paid Trafigura under the letters of credit for both shipments. However, Winson had no choice but to pay Trafigura, and this did not arise from an honest belief in the genuineness of the transaction: at [132].

The Nullity Exception

20 The decision of Beam Technology (Mfg) Pte Ltd v Standard Chartered Bank [2003] 1 SLR(R) 597, which OCBC and SCB relied on to contend that the Nullity Exception had been made out, was not entirely applicable on the facts: at [135] to [139].

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

What was the principal legal question in Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd [2024] SGCA 31?

The principal question in the two appeals was whether the Fraud Exception for letters of credit transactions should bear a higher threshold beyond the standard applicable for other financial instruments. The Court of Appeal also addressed the nullity exception, with judgment delivered on 21 August 2024.

Which appeals were heard together in Winson Oil Trading v OCBC [2024] SGCA 31?

Civil Appeal No 40 of 2023 (from Suit No 463 of 2020) against Oversea-Chinese Banking Corporation Limited and Civil Appeal No 41 of 2023 (from Suit No 474 of 2020) against Standard Chartered Bank (Singapore) Limited, both brought by Winson Oil Trading Pte Ltd, were heard together.

Statutes Cited

Evidence Act (Cap 97) Cases on this Act →

s 32(1)(c)

Securities and Futures Act (Cap 289) Cases on this Act →

Cases Cited (26)

SG (3)

[2022] SGHC 263 [2023] SGHC 220 [2024] SGHC 145

SLR (16)

[1992] 2 SLR(R) 20 [1992] 3 SLR(R) 146 [2001] 2 SLR(R) 435 [2003] 1 SLR(R) 597 [2005] 1 SLR(R) 154 [2008] 2 SLR(R) 61 [2008] 3 SLR(R) 261 [2011] 2 SLR 47 [2014] 4 SLR 375 [2015] 2 SLR 686 [2015] 3 SLR 38 [2016] 3 SLR 557 [2017] 4 SLR 1369 [2022] 2 SLR 676 [2022] 4 SLR 1 [2023] 2 SLR 587

UK (7)

[1891] 2 Ch 449 [1893] 1 QB 491 [1977] 2 All ER 862 [1978] QB 159 [1982] 1 AC 341 [1983] 1 AC 168 [2002] 1 WLR 1975