Winson Oil Trading Pte. Ltd. v Oversea-Chinese Banking Corporation Limited

Winson Oil Trading Pte Ltd sued Oversea-Chinese Banking Corporation Ltd (OCBC) in Suit No 463 of 2020 and Standard Chartered Bank (Singapore) Ltd (SCB) in Suit No 474 of 2020 for non-payment under letters of credit the banks had issued to pay for gasoil Winson sold to Hin Leong Trading (Pte) Ltd. The sales were the final legs of circular trades concluded on the afternoon of 27 March 2020: Hin Leong sold gasoil to Trafigura Pte Ltd, Trafigura sold the same quantity to Winson, and Winson sold it back to Hin Leong. The cargoes were said to be on the vessels Ocean Voyager and Ocean Taipan.

Winson presented letters of indemnity based on copy non-negotiable bills of lading it had received, representing among other things that valid bills existed and that it had good title to the cargo and had passed it to Hin Leong. On 15 April 2020 OCBC rejected Winson's first presentation, stating that no physical cargo had been shipped to the Ocean Voyager. That day Winson prepared new documents and made second presentations with the vessels switched between the banks. The banks resisted payment on the fraud exception, contending the bills were forgeries and no cargo was shipped for these sales. The sum Winson claimed was US$60,852,855.49.

1. Whether a beneficiary who makes a false representation recklessly, indifferent to its truth, falls within the fraud exception.
2. Whether Winson's letters of indemnity contained false representations of material fact.
3. Whether Winson made those representations without believing them to be true.
4. Whether SCB could resist payment on the grounds of non-compliance or that Winson had suffered no loss.

Following United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 and Brody, White and Co Inc v Chemet Handel Trading (S) Pte Ltd [1992] 3 SLR(R) 146, the exception applies where a beneficiary presents documents containing material representations it knows to be untrue. The judge held that making a representation without belief in its truth suffices, and that this includes recklessness in the sense of indifference to the truth, as explained in Derry v Peek (1889) 14 App Cas 337. He respectfully declined to follow a contrary view of the SICC.

Relying on reports of Hin Leong's interim judicial managers and statements of a Hin Leong employee, admitted as statements against interest and business records, the judge found that the copy bills were forgeries signed by Hin Leong staff, and that the cargoes appeared to have been sold earlier by Hin Leong to another buyer. No inspector was appointed and no loading documents existed. The representations were therefore false; whether the sale was a sham was left open.

On Winson's state of mind, the judge found the trades were pre-structured and Winson knew it. It never received loading documents, did not query an unexplained change in the bill quantity, expressed doubts to OCBC about clean title, and on being told no cargo was shipped made no real enquiry before re-presenting. Its explanation to OCBC for the switch was untrue, and the checks it relied on could not confirm the shipments. By the second presentations Winson did not believe its representations, or was at least indifferent to their truth.

SCB had issued no timely rejection notice under UCP 600, so it could not rely on non-compliance. Loss was not an element of a claim for payment under a letter of credit, and the assignment to an affiliate did not impair Winson's rights.

Andre Maniam J dismissed Winson's claims against both banks because the fraud exception was established, and awarded the banks their costs. He left open the nullity exception and unconscionability, and rejected SCB's non-compliance and no-loss arguments.