Pertamina Energy Trading v Credit Suisse: Fraudulent Drawdown & Banker's Set-Off

In Pertamina Energy Trading Limited v Credit Suisse, the Singapore Court of Appeal dismissed Pertamina's appeal against Credit Suisse. The case centered on a fraudulent drawdown of a credit facility by Pertamina's employee, Ariefin, and the bank's subsequent set-off of funds from Pertamina's account. The court found the drawdown unauthorized due to forgery of the ratification resolution and improper sealing of the charge. However, a conclusive evidence clause in the account opening conditions, signed by authorized signatories, precluded Pertamina from asserting the forgery, as they failed to report discrepancies in bank statements within the stipulated timeframe. The claim was for the return of approximately US$8 million.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal dismissed with costs and the usual consequential orders.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal dismisses Pertamina's claim against Credit Suisse due to a fraudulent drawdown and a conclusive evidence clause.

1.7 Decision Date

14 August 2006

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Credit Suisse	Respondent	Corporation	Appeal Dismissed	Won	Ramesh Selvaraj of Allen & Gledhill Muthu Arusu of Allen & Gledhill K Shanmugam of Allen & Gledhill Edward Tiong of Allen & Gledhill
Pertamina Energy Trading Limited	Appellant	Corporation	Appeal Dismissed	Lost	Oommen Mathew of Haq & Selvam C R Rajah of Tan Rajah & Cheah Rajmohan of Haq & Selvam Anjali Iyer of Anjali Iyer & Associates

3. Judges

Judge Name	Title	Delivered Judgment
Chan Sek Keong	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	No
V K Rajah	Judge	Yes

4. Counsels

Counsel Name	Organization
Ramesh Selvaraj	Allen & Gledhill
Muthu Arusu	Allen & Gledhill
K Shanmugam	Allen & Gledhill
Edward Tiong	Allen & Gledhill
Oommen Mathew	Haq & Selvam
C R Rajah	Tan Rajah & Cheah
Rajmohan	Haq & Selvam
Anjali Iyer	Anjali Iyer & Associates

4. Facts

A fraudulent employee of Pertamina caused substantial losses to the company.
Pertamina opened a deposit account with Credit Suisse.
A credit facility was secured by a charge over Pertamina's deposit account.
Pertamina's employee fraudulently opened the deposit account.
Credit Suisse facilitated a drawdown on the credit facility.
Credit Suisse set off the sum against moneys in the deposit account.
Wahjoe knew about the loan, the agreement between the appellant and Aceasia and also the fact that the deposit was subject to a charge, as early as in June 2002.

5. Formal Citations

Pertamina Energy Trading Limited v Credit Suisse, CA 116/2005, [2006] SGCA 27

6. Timeline

Date	Event
2001-11-01	Dedy introduced Wahjoe and Ariefin to Lim.
2001-11-19	Ariefin and other officers met Lim to confirm opening an account.
2002-01-17	Directors signed resolution authorizing opening of bank account.
2002-02-15	Pertamina transferred US$9m to Credit Suisse.
2002-02-18	Wahjoe and Ariefin signed documents, including Company Mandate.
2002-02-26	Ariefin handed over drawdown request letter to Lim.
2002-03-01	Pertamina appointed solicitor to affix company seal on charge.
2002-03-05	Credit Suisse received signed ratification resolution and charge.
2002-03-05	US$8m was drawn down from Pertamina’s account.
2002-03-12	Terms of credit facility stipulated in a letter.
2002-03-18	Mail re-direction letter signed by Ariefin.
2002-06-01	Wahjoe instructed Ariefin to transfer funds to another bank.
2002-07-09	Wahjoe discovered transfer had not been effectuated.
2002-07-18	Wahjoe met Dedy in Jakarta.
2002-07-22	Wahjoe met Dedy in Singapore.
2002-08-09	Wahjoe met Dedy at a mosque in Singapore.
2002-08-01	Wahjoe found Asset Management Agreement on Ariefin’s table.
2002-10-01	Internal audit conducted.
2002-10-21	Request made to Credit Suisse for details of deposit and facility.
2002-10-23	Credit Suisse sent faxed letter in response to request.
2002-12-30	Internal audit team issued report.
2003-03-17	Wahjoe attempted to call Lim.
2003-03-21	Wahjoe met with Dedy to discuss deposit.
2003-04-04	Representatives reviewed deposit arrangements with Credit Suisse.
2003-04-07	Key officers met to assess the situation.
2003-04-09	Ariefin and finance manager met with Credit Suisse director.
2003-04-10	Credit Suisse notified Pertamina of instructions to set off loan.
2003-04-10	Credit Suisse effected the set-off.
2003-08-01	Pertamina conducted another internal audit.
2003-11-01	Pertamina sent solicitors’ letter of demand.
2006-08-15	Judgment reserved.

7. Legal Issues

Banker’s right of set-off
- Outcome: The court held that the bank was entitled to exercise its right of set-off due to a conclusive evidence clause.
- Category: Substantive
- Sub-Issues:
  - Validity of set-off against fraudulently opened account
  - Bank's notice of fraud or forgery
- Related Cases:
  - (1872) LR 8 Ch App 41
  - [1972] AC 785
  - [1990] 2 QB 298
  - (1894) 11 TLR 56
Estoppel
- Outcome: The court found that the bank failed to properly plead and prove detriment, therefore the defence of estoppel failed.
- Category: Substantive
- Sub-Issues:
  - Failure to plead estoppel
  - Failure to particularize and prove detriment
- Related Cases:
  - [1933] AC 51
  - [1951] AC 489
  - [2000] 3 All ER 793
Conclusive evidence clause
- Outcome: The court held that the bank was entitled to rely on the conclusive evidence clause as a defence.
- Category: Substantive
- Sub-Issues:
  - Validity of clause in bank's conditions
  - Effect of clause on customer's duties
- Related Cases:
  - [1986] AC 80
  - (1916) 34 DLR 743
  - (1972) 27 DLR (3d) 81
  - [1992] 2 SLR 828
  - [2000] 2 SLR 191
  - [2003] 1 SLR 747
Validity of charge
- Outcome: The court found that the charge was not properly sealed and was defective.
- Category: Substantive
- Sub-Issues:
  - Effect of registration of charge
  - Conclusiveness of certificate of registration
- Related Cases:
  - [1986] HKLR 587
  - [1986] QB 1114
  - [1971] Ch 442
  - [1988] SLR 340

8. Remedies Sought

Monetary Damages
Return of deposit

9. Cause of Actions

Breach of Contract
Claim for return of funds

10. Practice Areas

Commercial Litigation
Banking Litigation

11. Industries

Banking
Energy

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Pertamina Energy Trading Limited v Credit Suisse	High Court	Yes	[2006] SGHC 4	Singapore	Cited as the decision being appealed against.
In re EUROPEAN BANK	Court of Appeal	Yes	(1872) LR 8 Ch App 41	England and Wales	Cited for the principle of a banker's common law right to combine accounts.
National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd	House of Lords	Yes	[1972] AC 785	England and Wales	Cited for affirming the bank’s common law right of set-off.
In re K (Restraint Order)	Queen's Bench Division	Yes	[1990] 2 QB 298	England and Wales	Cited for the principle that a bank's right to combine accounts is fundamental.
T and H Greenwood Teale v William Williams Brown and Company	Not Available	Yes	(1894) 11 TLR 56	England and Wales	Cited for exceptions to the common law right of set-off.
Sun Hung Kai Bank Ltd v Attorney General	Not Available	Yes	[1986] HKLR 587	Hong Kong	Cited for the conclusiveness of the registrar’s certificate.
Regina v Registrar of Companies, Ex parte Central Bank of India	Queen's Bench Division	Yes	[1986] QB 1114	England and Wales	Cited for the principle that a registered charge cannot be challenged.
In re CL Nye Ltd	Chancery Division	Yes	[1971] Ch 442	England and Wales	Cited for proceedings in personam despite registration.
Re Lin Securities (Pte)	High Court	Yes	[1988] SLR 340	Singapore	Cited for the certificate's evidence of compliance.
London Joint Stock Bank, Limited v Macmillan and Arthur	House of Lords	Yes	[1918] AC 777	England and Wales	Cited for the customer's duty to prevent fraud.
Greenwood (Pauper) v Martins Bank, Limited	House of Lords	Yes	[1933] AC 51	England and Wales	Cited for the customer's duty to inform the bank of forgery.
Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association	High Court	Yes	[1992] 2 SLR 828	Singapore	Cited for applying Macmillan and Greenwood.
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd	Privy Council	Yes	[1986] AC 80	Hong Kong	Cited for rejecting increased customer responsibility.
National Australia Bank Ltd v Hokit Pty Ltd	New South Wales Court of Appeal	Yes	(1996) 39 NSWLR 377	Australia	Cited for endorsing Tai Hing.
Fried v National Australia Bank Ltd	Federal Court of Australia	Yes	(2001) 111 FCR 322	Australia	Cited for endorsing Tai Hing.
National Bank of New Zealand Ltd v Walpole and Patterson Ltd	Not Available	Yes	[1975] 2 NZLR 7	New Zealand	Cited for endorsing Tai Hing.
Canadian Pacific Hotels Ltd v Bank of Montreal	Not Available	Yes	(1987) 40 DLR (4th) 385	Canada	Cited for endorsing Tai Hing.
Canara Bank v Canara Sales Corporation	Not Available	Yes	[1988] LRC (Comm) 5	India	Cited for endorsing Tai Hing.
Khoo Tian Hock v Oversea-Chinese Banking Corp Ltd	High Court	Yes	[2000] 4 SLR 673	Singapore	Cited for the customer's duty not to facilitate fraud.
Crossley v Faithful & Gould Holdings Ltd	Court of Appeal	Yes	[2004] 4 All ER 447	England and Wales	Cited for implying a term in a contract.
Columbia Graphophone Co v Union Bank of Canada	Not Available	Yes	(1916) 34 DLR 743	Canada	Cited for the validity of conclusive evidence clauses.
Arrow Transfer Co Ltd v Royal Bank of Canada	Supreme Court	Yes	(1972) 27 DLR (3d) 81	Canada	Cited for the verification agreement as a complete defence.
Stephan Machinery Singapore Pte Ltd v Overseas-Chinese Banking Corp Ltd	High Court	Yes	[2000] 2 SLR 191	Singapore	Cited for holding a conclusive evidence clause to be valid.
Elis Tjoa v United Overseas Bank	High Court	Yes	[2003] 1 SLR 747	Singapore	Cited for upholding a similar conclusive evidence clause.
Tan Mui Teck v PP	High Court	Yes	[2003] 3 SLR 139	Singapore	Cited for preferring one expert's opinion.
R Mahendran v R Arumuganathan	High Court	Yes	[1999] 2 SLR 579	Singapore	Cited for the judicial approach to evidence.
Dalip Kaur v Pegawai Polis Daerah, Balai Polis Daerah, Bukit Mertajam	Not Available	Yes	[1992] 1 MLJ 1	Malaysia	Cited for the judicial approach to evidence.
Ri Jong Son v Development Bank of Singapore	High Court	Yes	[1998] 3 SLR 64	Singapore	Cited for the effective dispatch of statements.
Ex parte Young; In re Kitchin	Court of Appeal	Yes	(1881) 17 Ch D 668	England and Wales	Cited for the validity of conclusive evidence clauses.
Bache & Co (London) Ltd v Banque Vernes et Commerciale de Paris SA	Not Available	Yes	[1973] 2 Lloyd’s Rep 437	England and Wales	Cited for the validity of conclusive evidence clauses.
Dobbs v The National Bank of Australasia Limited	High Court of Australia	Yes	(1935) 53 CLR 643	Australia	Cited for the validity of conclusive evidence clauses.
Lishman v Christie & Co	Queen's Bench Division	Yes	(1887) 19 QBD 333	England and Wales	Cited for the validity of conclusive evidence clauses.
Chip Hua Poly-Construction Pte Ltd v Housing and Development Board	High Court	Yes	[1998] 2 SLR 35	Singapore	Cited for the validity of conclusive evidence clauses.
Standard Chartered Bank v Neocorp International Ltd	High Court	Yes	[2005] 2 SLR 345	Singapore	Cited for the validity of conclusive evidence clauses.
Fung Kai Sun v Chan Fui Hing	Privy Council	Yes	[1951] AC 489	Hong Kong	Cited for the requirements of estoppel.
Scottish Equitable plc v Derby	Not Available	Yes	[2000] 3 All ER 793	England and Wales	Cited for the requirements of estoppel.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Hong Kong Companies Ordinance (Cap 32) s 83(2)	Hong Kong
Rules of Court (Cap 322, R 5, 2004 Rev Ed) O 18 r 8	Singapore
Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) s 3	Singapore
Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) Second Schedule	Singapore
Uniform Commercial Code § 4-406(c)	United States
Uniform Commercial Code § 4-406(d)	United States
Uniform Commercial Code § 4-406(e)	United States

15. Key Terms and Keywords

15.1 Key Terms

Banker's set-off
Conclusive evidence clause
Credit facility
Fraudulent drawdown
Charge on cash amounts
Ratification resolution
Account Opening Conditions
Company Mandate
Mail re-direction letter
Asset Management Agreement

15.2 Keywords

Banker's set-off
Credit Suisse
Pertamina
Fraud
Forgery
Estoppel

17. Areas of Law

Area Name	Relevance Score
Fraud and Deceit	85
Banking Law	80
Banking and Finance	75
Contract Law	70
Banker’s set-off	70
Credit and Security	65
Conclusive Evidence Clause	65
Estoppel	60
Certificate of registration of charge	55
Civil Practice	50
Pleadings	45
Misrepresentation	40
Evidence	35
Guarantee	30

16. Subjects

Banking
Contract Law
Civil Procedure
Fraud
Estoppel