UniCredit Bank AG v Glencore Singapore Pte Ltd: Letter of Credit Fraud & Misrepresentation

In UniCredit Bank AG v Glencore Singapore Pte Ltd, the General Division of the High Court of Singapore heard a case regarding allegations of fraud and misrepresentation in relation to a letter of credit. UniCredit Bank AG ("UniCredit") sued Glencore Singapore Pte Ltd (“Glencore”) seeking rescission of the letter of credit and repayment of funds, alleging that Glencore made fraudulent misrepresentations. The court dismissed all of UniCredit's claims, finding no evidence of fraud, conspiracy, or unjust enrichment on Glencore's part. The court ordered UniCredit to pay costs to Glencore.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

All of UniCredit's claims against Glencore are dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

UniCredit sues Glencore for fraud and misrepresentation related to a letter of credit. The court dismissed all claims, finding no fraud or conspiracy.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
UniCredit Bank AGPlaintiffCorporationClaim DismissedLost
Glencore Singapore Pte LtdDefendantCorporationJudgment for DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
Andre ManiamJudgeYes

4. Counsels

Counsel NameOrganization
Tan Wee Kheng Kenneth MichaelKenneth Tan Partnership
Hannah ChuaDentons Rodyk & Davidson LLP
Koh Kia JengDentons Rodyk & Davidson LLP
Herman JeremiahDentons Rodyk & Davidson LLP
Toh Cher HanDentons Rodyk & Davidson LLP
Tan Yi Xi JoieDentons Rodyk & Davidson LLP
Andrea Gan YingtianDentons Rodyk & Davidson LLP
Tham LijingTham Lijing LLC
Colin LiewColin Liew LLC
Chan Leng SunChan Leng Sun LLC
Chong Ik WeiCLASIS LLC
Wong Shi YiCLASIS LLC

4. Facts

  1. UniCredit granted Hin Leong banking facilities of US$85m to obtain LCs for purchasing commodities.
  2. Hin Leong applied for an LC of US$37,209,550.35 to finance the purchase of High-Sulphur Fuel Oil from Glencore.
  3. Hin Leong contracted to purchase the goods from Glencore (Sale Contract).
  4. Glencore agreed to simultaneously buy back the goods from Hin Leong (Buyback Contract).
  5. Hin Leong misrepresented to UniCredit that the LC application was for "Unsold cargo."
  6. UniCredit issued the LC on 29 November 2019.
  7. Glencore presented a commercial invoice and LOI to UniCredit for payment under the LC.
  8. UniCredit paid Glencore US$36,997,691.57 pursuant to the LC.
  9. Hin Leong misrepresented to UniCredit that the goods remained unsold as late as February 2020.
  10. Hin Leong was placed under interim judicial management on 27 April 2020 and into liquidation on 8 March 2021.

5. Formal Citations

  1. UniCredit Bank AG v Glencore Singapore Pte Ltd, Suit No 1007 of 2020, [2022] SGHC 263

6. Timeline

DateEvent
Master Discounting Agreement between UniCredit and Glencore Grain Singapore Pte Ltd was dated.
UniCredit granted Hin Leong banking facilities in the sum of US$85m.
Hin Leong applied to UniCredit for an irrevocable LC in the sum of US$37,209,550.35.
Hin Leong contracted to purchase goods from Glencore (Sale Contract).
Hin Leong submitted a revised LC application to UniCredit.
UniCredit issued the LC.
Glencore presented documents to UniCredit for payment under the LC.
Title to the goods passed from Glencore to Hin Leong, and immediately back to Glencore (Buyback Contract).
UniCredit paid Glencore pursuant to the LC.
UniCredit asked Hin Leong if the goods had been sold by Hin Leong.
UniCredit issued a notice of demand to Hin Leong.
UniCredit asked Glencore if it had the original BLs referred to in the LC.
Hin Leong was placed under interim judicial management.
Hin Leong was placed under judicial management.
Hin Leong was placed into liquidation.
Trial began.
Trial concluded.
Judgment reserved.

7. Legal Issues

  1. Fraudulent Misrepresentation
    • Outcome: The court found no evidence of fraudulent misrepresentation on the part of Glencore.
    • Category: Substantive
    • Sub-Issues:
      • Statements of intention
      • Half-truth
  2. Sham Transaction
    • Outcome: The court found that the sale contract was not a sham or fictitious transaction.
    • Category: Substantive
  3. Breach of Letter of Indemnity
    • Outcome: The court found that Glencore had not breached the letter of indemnity.
    • Category: Substantive
  4. Conspiracy to Injure by Unlawful Means
    • Outcome: The court dismissed the conspiracy claim, finding no evidence of any such conspiracy between Glencore and Hin Leong.
    • Category: Substantive
  5. Unjust Enrichment
    • Outcome: The court dismissed the unjust enrichment claim, finding nothing unjust in Glencore being paid on the LC.
    • Category: Substantive

8. Remedies Sought

  1. Rescission of the Letter of Credit
  2. Repayment of US$36,997,691.57
  3. Damages
  4. Interest
  5. Costs

9. Cause of Actions

  • Rescission of Letter of Credit
  • Fraud/Deceit
  • Conspiracy to Injure
  • Unjust Enrichment
  • Breach of Contract (Rights of Third Parties) Act

10. Practice Areas

  • Commercial Litigation
  • Banking
  • International Trade

11. Industries

  • Finance
  • Commodities Trading

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Goodwood Associates v SouthernpecHigh CourtYes[2020] SGHC 242SingaporeCited for the principle that there is a strong presumption that the parties to a contract intend to create legal relations by way of the contractual documents, and that the onus to rebut this presumption lies on the party alleging the sham. Also cited for the principle that the motive of the parties does not render a transaction a sham if there was an intention to create legal relations in connection with genuine cargo.
Toh Eng Tiah v Jiang AngelinaUnknownYes[2021] 1 SLR 1176SingaporeCited for the principle that there is a strong presumption that the parties to a contract intend to create legal relations by way of the contractual documents, and that the onus to rebut this presumption lies on the party alleging the sham.
Credit Agricole v PPT Energy TradingHigh CourtYes[2022] SGHC(I) 1SingaporeCited for the principle that the motive for a transaction is not in itself determinative of whether it is a sham. Also cited for the principle that financing as a motive does not render the transactions a sham if there was an intention to create legal relations in connection with genuine cargo.
Thai Chee Ken and others (Liquidators of Pan-Electric Industries Ltd) v Banque ParibasHigh CourtYes[1992] 1 SLR(R) 280SingaporeCited as an example of a genuine sale and buyback of shares to raise financing.
Thai Chee Ken and others (Liquidators of Pan-Electric Industries Ltd) v Banque ParibasCourt of AppealYes[1993] 1 SLR(R) 871SingaporeCited as an example of a genuine sale and buyback of shares to raise financing.
Garnac Grain Company Incorporated v HMF Faure & Fairclough Ltd and anotherEnglish Court of AppealYes[1966] 1 QB 650England and WalesCited as authority for the principle that a simultaneous sale-and-buyback arrangement may involve a genuine sale, and a genuine buyback. Also cited for the principle that expecting not to have to perform an obligation given the circumstances does not make that obligation a sham.
Goodwood Associates Pte Ltd v Southernpec (Singapore) Shipping Pte Ltd and another suitHigh CourtYes[2020] SGHC 242SingaporeCited as an example of circular transactions that were not found to be a sham. Also cited for the distinction between circular trading transactions in which no delivery of goods is contemplated and those in which no trading is contemplated at all.
Tower MCashback LLP 1 and another v Revenue and Customs CommissionersUnknownYes[2011] 2 AC 457England and WalesCited for the principle that circular chains of transactions are not ipso facto shams.
Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suitHigh CourtYes[2022] SGHC(I) 1SingaporeCited as an example of circular transactions that were not found to be a sham. Also cited for the principle that the motive for a transaction is not in itself determinative of whether the transaction is a sham or not, and that includes “financing transactions”.
BWG v BWFUnknownNo[2020] 1 SLR 1296SingaporeCited and distinguished as a case where circular transactions were found to be a disguised loan arrangement.
Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and anotherUnknownNo[2008] 1 SLR(R) 375SingaporeCited and distinguished as a case where an allotment of shares was found to be a sham.
JTrust Asia Pte Ltd v Group Lease Holdings Pte LtdUnknownYes[2020] 2 SLR 1256SingaporeCited for the elements of the tort of deceit.
Panatron Pte Ltd and anor v Lee Cheow Lee and anorUnknownYes[2001] 2 SLR(R) 435SingaporeCited for the elements of the tort of deceit.
Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA and others and other appealsCourt of AppealYes[2018] 1 SLR 894SingaporeCited for the principle that where a representation can be interpreted in a number of ways, a plaintiff is required to establish (and to plead) the sense in which he understood the representation at the time it was made, and it is in that sense which it must be established to be false.
Tan Chin Seng and others v Raffles Town Club Pte LtdUnknownYes[2003] 2 SLR(R) 307SingaporeCited for the principle that an actionable misrepresentation must be a false statement of existing or past fact.
Uday Mehra v L Capital Asia Advisors and othersHigh CourtYes[2022] SGHC 23SingaporeCited for the principle that a broken promise gives rise to a viable claim in fraudulent misrepresentation only if the representor had no intention of fulfilling the promise at the time he made it.
United City Merchants (Investments) Ltd and others v Royal Bank of Canada and othersUnknownYes[1982] 2 All ER 720England and WalesCited for the principle that a bank must pay on an LC even if the bank has knowledge that the seller at the time of presentation of the conforming documents is alleged by the buyer to have, and in fact has already, committed a breach of his contract with the buyer for the sale of the goods.
Beam Technology (Mfg) Pte Ltd v Standard Chartered BankCourt of AppealYes[2003] 1 SLR(R) 597SingaporeCited for the principle that the banker is only concerned with documents and what the credit requires them to be, not with goods or the contract which requires them to be paid for.
DBS Bank Ltd v Carrier Singapore (Pte) LtdUnknownYes[2008] 3 SLR(R) 261SingaporeCited as an example of fraud in presenting documents under a letter of credit.
Sztejn v Schroder Banking CorpUnknownYes(1941) 31 NYS 2d 631United StatesCited as an example of fraud in presenting documents under a letter of credit.
Aldabe Fermin v Standard Chartered BankUnknownYes[2010] 3 SLR 722SingaporeCited for the definition of a "half-truth".
Peek v GurneyHouse of LordsYes(1873) LR 6 HL 377England and WalesCited for the definition of a "half-truth".
Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appealUnknownYes[2013] 4 SLR 193SingaporeCited for the principle that a term cannot be implied into a contract if it goes against the actual intentions of the parties.
Trafigura Beheer BV v Kookmin Bank CoUnknownYes[2005] EWHC 2350 (Comm)England and WalesCited as an example of a case where the seller presented an LOI to obtain payment on an LC and the court found that there was no viable claim against the seller for fraudulent misrepresentation.

13. Applicable Rules

Rule Name
The Uniform Customs and Practice for Documentary Credits (2007 Revision) (“UCP 600”)

14. Applicable Statutes

Statute NameJurisdiction
Contract (Rights of Third Parties) Act (Cap 53B)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Letter of Credit
  • Sale Contract
  • Buyback Contract
  • Letter of Indemnity
  • Bills of Lading
  • Sham Transaction
  • Fraudulent Misrepresentation
  • Unjust Enrichment
  • Unsold Cargo
  • Pre-Sold Goods

15.2 Keywords

  • Letter of Credit
  • Fraud
  • Misrepresentation
  • Banking
  • International Trade
  • Commodities
  • Singapore

17. Areas of Law

Area NameRelevance Score
Letters of Credit80
Banking Law75
Contract Law70
Fraud and Deceit65
Misrepresentation60
Commercial Law50
Letter of Indemnity45
Trade Finance40
Company Law30
Bankruptcy20

16. Subjects

  • Banking
  • International Trade
  • Contract Law
  • Fraud