Reed Smith In-depth

Last year, we reported on a decision of the Singapore High Court (the SHC) in the case of UniCredit Bank AG v. Glencore Singapore Pte Ltd [2022] SGHC 263. The case concerned issues relating to (i) the legitimacy of circular commodity sales transactions; (ii) representations made to issuing banks in connection with letters of indemnity; and (iii) the disclosure obligations when presenting documents for payment under letters of credit. Since then, UniCredit Bank AG (the Bank) brought an appeal in the Singapore Court of Appeal (the CoA). It appealed against the SHC’s dismissal of the Bank’s claim in the tort of deceit in relation to the relevant letter of credit (the LC) and the letter of indemnity (the LOI).

This alert summarises the decision and the reasons why the CoA in UniCredit Bank AG v. Glencore Singapore Pte Ltd [2023] SGCA 41 dismissed the Bank’s appeal and found in favour of Glencore Singapore Pte Ltd (Glencore). 

Factual background

The key facts relevant to the appeal are summarised below. A more detailed factual background can be found in our previous client alert.

  • On 27 November 2019, Hin Leong Trading (Pte) Ltd (Hin Leong) entered simultaneous sale and buyback transactions with Glencore (under the Sale Contract and the Buyback Contract, respectively) for a cargo of high-sulphur fuel oil. To finance its purchase, Hin Leong applied for an irrevocable LC from the Bank on the same day.
  • On 28 November 2019, Hin Leong submitted a revised LC application to the Bank providing a copy of the Sale Contract and informing it that the cargo was “unsold”. This statement was untrue as, at the time, Hin Leong had already contracted to sell the cargo back to Glencore.
  • On 29 November 2019, the Bank issued an LC subject to the Uniform Customs and Practice for Documentary Credits (2007 Revision) to Glencore. The LC contained a term that allowed Glencore to present a signed commercial invoice and an LOI (in the form stipulated in the LC) in lieu of original bills of lading (BLs) in return for payment.
  • On 2 December 2019, Glencore presented a commercial invoice under the Sale Contract and an LOI addressed to Hin Leong in the format prescribed by the LC to the Bank for payment under the LC; the Bank paid Glencore on 3 December 2019.
  • Up until early March 2020, Hin Leong maintained that the cargo was “unsold” when questioned by the Bank.
  • On 8 March 2021, Hin Leong became insolvent and entered liquidation. The Bank was unable to recover the monies paid to Glencore or any form of securities in relation to the cargo from Hin Leong. Instead, it sought to recover, from Glencore, the payment which it had made under the LC.