Societe Generale v Statoil Asia Pacific: Payment Confirmation & Invoice Discounting Dispute

Societe Generale ("SOCGEN"), a banking corporation, sued Statoil Asia Pacific Pte Ltd ("STATOIL"), a petroleum product seller, in the High Court of Singapore before S Rajendran J, regarding a Payment Confirmation with Invoice Discounting facility provided by SOCGEN to STATOIL for transactions with Siam United Services Public Co Ltd ("SUSCO"). When SUSCO defaulted on payments, SOCGEN claimed a right of recourse against STATOIL for the discounted amounts. The court dismissed SOCGEN's claim, finding that SUSCO's failure to pay was solely due to its insolvency, triggering SOCGEN's liability under the Payment Confirmations.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiffs’ claim dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Societe Generale sues Statoil over a payment confirmation and invoice discounting facility after SUSCO defaulted due to insolvency. Claim dismissed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Societe GeneralePlaintiffCorporationClaim DismissedLost
Statoil Asia Pacific Pte LtdDefendantCorporationJudgment for DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
S RajendranJudgeYes

4. Counsels

Counsel NameOrganization
Ng Yeow KhoonShook Lin & Bok
Sarjit Singh Gill SCShook Lin & Bok
Suhaimi LazimShook Lin & Bok
Melanie HoHarry Elias Partnership
S SuresshHarry Elias Partnership
Lawrence QuaheHarry Elias Partnership
Yeo Yen PingHarry Elias Partnership

4. Facts

  1. SOCGEN provided STATOIL with a Payment Confirmation with Invoice Discounting facility for transactions with SUSCO.
  2. STATOIL entered into contracts with SUSCO for regular gasoil shipments.
  3. SUSCO provided Payment Undertakings to SOCGEN for each shipment.
  4. SOCGEN issued Payment Confirmations and discounted STATOIL's invoices.
  5. SOCGEN revised the Payment Confirmation form in May 1997, adding a proviso limiting liability.
  6. SUSCO defaulted on payments due under the Payment Undertakings.
  7. SOCGEN claimed a right of recourse against STATOIL for the discounted amounts.

5. Formal Citations

  1. Societe Generale v Statoil Asia Pacific Pte Ltd, Suit 786/1999, [2000] SGHC 64

6. Timeline

DateEvent
SOCGEN offered its Payment Confirmation with Invoice Discounting facility to STATOIL.
SOCGEN informed STATOIL that SUSCO was acceptable as a counterparty.
STATOIL entered into the 1st contract with SUSCO.
STATOIL entered into the 2nd contract with SUSCO.
SOCGEN revised the Payment Confirmation form.
Shipments from STATOIL to SUSCO under the 2nd contract began.
STATOIL entered into a 3rd contract with SUSCO.
Shipments from STATOIL to SUSCO under the 2nd contract ended.
SOCGEN received a Payment Undertaking from SUSCO for the first cargo under the 3rd contract.
SOCGEN decided not to extend the facility to STATOIL for shipments to SUSCO under the 3rd contract.
SOCGEN indicated it would consider renewing the line if SUSCO provided a standby letter of credit.
Mr. Verland relayed SOCGEN's suggestion to SUSCO in Bangkok.
Payment was due under the first Payment Undertaking for the 2nd contract; SUSCO defaulted.
SOCGEN issued a letter of demand to SUSCO.
SOCGEN asked SUSCO for a written explanation for the non-payment.
SUSCO sent a letter to STATOIL requesting a roll-over of the outstanding balance.
Mr. Verland broached the subject of rolling over SUSCO’s outstanding balance with SOCGEN.
Mr. Verland wrote to SUSCO regarding discussions with SOCGEN.
SOCGEN issued another letter of demand to SUSCO.
SUSCO responded to Mr. Verland's letter.
SOCGEN wrote to STATOIL stating it was not liable under the Payment Confirmations.
SOCGEN commenced suit against STATOIL.
Judgment was delivered.

7. Legal Issues

  1. Insolvency
    • Outcome: The court found that SUSCO was insolvent at the relevant time, meaning it was unable to meet its current demands, irrespective of its total assets.
    • Category: Substantive
    • Sub-Issues:
      • Commercial insolvency
      • Inability to meet current demands
      • Balance sheet insolvency
  2. Breach of Contract
    • Outcome: The court found that SUSCO's failure to make payments was not due to any commercial dispute or breach of contract between SUSCO and STATOIL, but solely due to SUSCO's insolvency.
    • Category: Substantive
  3. Interpretation of Contractual Terms
    • Outcome: The court interpreted the term 'insolvent' in the Payment Undertaking to mean commercial insolvency and determined that the failure to pay was 'only and directly' due to SUSCO's insolvency.
    • Category: Substantive
    • Sub-Issues:
      • Meaning of 'only and directly' in relation to causation
      • Construction of 'insolvent' in a commercial context

8. Remedies Sought

  1. Return of US$4,408,599.73

9. Cause of Actions

  • Breach of Contract
  • Recovery of Monies Paid

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation

11. Industries

  • Banking
  • Petroleum

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Re Great Eastern Hotel (Pte) LtdHigh CourtYes[1989] 1 MLJ 161MalaysiaCited regarding the definition of solvency, specifically rejecting the argument that a company is only solvent if it can pay debts 'out of its own money'.
Re Sanpete Builders (S) Pte LtdHigh CourtYes[1989] 1 MLJ 393SingaporeCited for the principle that proof of unpaid debt does not establish inability to pay debts and that insolvency should not be concluded from temporary lack of liquidity.
Re Sunshine Securites (Pte) LtdCourt of AppealYes[1978] 1 MLJ 57SingaporeCited to support the proposition that insolvency is established if a company is unable to meet its current liabilities from its current assets, emphasizing commercial insolvency.
Malayan Plant (Pte) Ltd v Moscow Naroday Bank LtdPrivy CouncilYes[1980] 2 MLJ 53SingaporeCited for adopting a similar approach to Re Sunshine Securities (Pte) Ltd regarding the definition of insolvency.
Re Yap Kim Kee & Sons Sdn BhdHigh CourtYes[1990] 2 MLJ 108MalaysiaCited regarding the requirements for a statutory demand under the Companies Act, specifically concerning the period for payment and warning of winding-up.
Re Beauty Word Enterprise Sdn BhdHigh CourtYes[1997] CSLR XX [6094]MalaysiaCited regarding the requirements for a statutory demand under the Companies Act, specifically concerning the period for payment and warning of winding-up.
Hongkong and Shanghai Banking Corpn Ltd v Kemajuan Bersatu Enterprise Sdn BhdHigh CourtYes[1992] 2 MLJ 370MalaysiaCited regarding the requirements for a statutory demand under the Companies Act, specifically concerning the period for payment and warning of winding-up.
Sri Hartamas Development Sdn Bhd v MBF Finance BhdSupreme CourtYes[1992] 1 MLJ 313MalaysiaCited for the interpretation of the 3-week period in a statutory demand, clarifying that it refers to the period of neglect after receipt of the notice, not a period to be specified in the notice itself.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Payment Confirmation
  • Invoice Discounting
  • Payment Undertaking
  • Insolvency
  • Commercial Insolvency
  • Recourse
  • Proviso
  • Letter of Credit

15.2 Keywords

  • Payment Confirmation
  • Invoice Discounting
  • Statoil
  • Societe Generale
  • SUSCO
  • Insolvency
  • Breach of Contract

17. Areas of Law

Area NameRelevance Score
Guarantee90
Documentary Credits85
Contract Law80
Banking and Finance75
Invoice Discounting70
Payment Undertaking70
Commercial Law65
Restructuring and Insolvency50

16. Subjects

  • Banking
  • Finance
  • International Trade
  • Commodities Trading