Unicredit Bank AG v Glencore Singapore Pte. Ltd.

UniCredit Bank AG granted Hin Leong Trading (Pte) Ltd banking facilities of US$85m on 22 November 2019. On 27 November 2019 Hin Leong bought 150,000 metric tons of high-sulphur fuel oil from Glencore Singapore Pte Ltd and, by a separate contract made at the same time, agreed to sell the oil back to Glencore. Title was to pass to Hin Leong and immediately back to Glencore on 2 December 2019. Hin Leong applied to UniCredit for a letter of credit for US$37,209,550.35, told UniCredit the cargo was unsold, and disclosed only the sale contract.

The letter of credit allowed payment against Glencore's invoice and a letter of indemnity (LOI) in a set form addressed to Hin Leong, in which Glencore agreed to locate and surrender the original bills of lading to Hin Leong. Glencore presented those documents and was paid on 3 December 2019. Hin Leong later went into judicial management and then liquidation, leaving UniCredit unpaid and without the bills of lading.

UniCredit sued Glencore in HC/S 1007/2020 on six causes of action. The High Court dismissed them all in [2022] SGHC 263, finding among other things that the sale contract was not a sham. UniCredit appealed (Civil Appeal No 9 of 2023) only against the dismissal of its claim in the tort of deceit.

1. Whether the fraud exception to the autonomy of letters of credit had any application to the case.
2. Whether Glencore, by presenting the LOI, made any representation to UniCredit about its intention to surrender the bills of lading.
3. Whether any such representation was false or fraudulent, and whether UniCredit's loss was caused by it.

The court said UniCredit had blended the fraud exception with the tort of deceit, though they rest on different bases: deceit protects the right not to be lied to, while the fraud exception is founded on public policy. The fraud exception is limited to fraud on the documents, such as forged or false bills of lading. Here the LOI was a genuine document, and UniCredit did not appeal the finding that the sale contract was not a sham, so there was no basis for it.

Glencore made no representation to UniCredit. The LOI was addressed to Hin Leong and its promise to indemnify ran to Hin Leong. UniCredit chose to accept a payment LOI in that form and could have required the bills of lading to be delivered to the bank, but did not. In effect it was trying to rely on a contractual promise to which it was not a party. Read as a whole, the LOI contemplated that the bills of lading might never be delivered, with an indemnity if so, so it carried no implied representation that Glencore intended to deliver them. The judge had not added a gloss by speaking of surrender if the circumstances required it.

There was also no fraud. The sale and buyback had a legitimate commercial purpose: it let Glencore obtain cheaper financing for its working capital. Glencore was not privy to Hin Leong's untruth to UniCredit, a finding UniCredit did not appeal. Even if the wider representation had been made, it would have been true: Glencore's bank, BBVA, financed the buyback against an LOI from Hin Leong addressed to BBVA, so BBVA could demand the bills of lading and Hin Leong would then have to ask Glencore. Glencore could not have known Hin Leong would never ask.

UniCredit's loss came from Hin Leong. The court found Hin Leong deliberately lied about the cargo being unsold, and UniCredit issued the irrevocable credit on that basis. Finally, the court gave a provisional view that whether a promise carries an implied representation of intention to perform depends on the type of promise and its context; it is a fact-centric inquiry.

The Court of Appeal dismissed the appeal and ordered UniCredit to pay Glencore costs of $100,000, including disbursements, with the usual consequential orders.