Bank of China v BP Singapore: Negligence, Fraud & Letter of Credit Dispute

In Bank of China Ltd, Singapore Branch v BP Singapore Pte Ltd and others, the High Court of Singapore heard appeals regarding the striking out of claims by Bank of China against BP Singapore related to payments made under letters of credit. The Bank sued BP for fraud, negligence, conspiracy, and unjust enrichment, alleging misrepresentations regarding transactions financed by the LCs. The court allowed the Bank's appeal, reinstating the claims in negligence, fraud, conspiracy, and unjust enrichment.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

Appeal allowed; the Bank's claims in negligence, fraud, conspiracy, and unjust enrichment are reinstated.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Bank of China sues BP Singapore for negligence and fraud related to letter of credit payments. The court examines the autonomy principle and duty of care.

1.7 Decision Date

30 May 2021

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Bank of China Ltd, Singapore Branch	Plaintiff, Appellant	Corporation	Appeal Allowed	Won	Jason Chan, Tan Xeauwei, Melissa Mak, Afzal Ali, Marrissa Miralini Karuna, Racheal Wong Shu Yi
BP Singapore Pte Ltd	Defendant, Respondent	Corporation	Appeal Dismissed	Lost	Harpreet Singh Nehal, Jordan Tan, Victor Leong, Chew Kei-Jin, Samantha Ch’ng, Tyne Lam
Lim Oon Kuin	Defendant	Individual	Neutral	Neutral	Ayana Ki
Lim Huey Ching	Defendant	Individual	Neutral	Neutral	Eileen Yeo
Lim Chee Meng	Defendant	Individual	Neutral	Neutral	Lim Qiu’en

3. Judges

Judge Name	Title	Delivered Judgment
Andre Maniam	Judicial Commissioner	Yes

4. Counsels

Counsel Name	Organization
Jason Chan	Allen & Gledhill LLP
Tan Xeauwei	Allen & Gledhill LLP
Melissa Mak	Allen & Gledhill LLP
Afzal Ali	Allen & Gledhill LLP
Marrissa Miralini Karuna	Allen & Gledhill LLP
Racheal Wong Shu Yi	Allen & Gledhill LLP
Harpreet Singh Nehal	Audent Chambers LLC
Jordan Tan	Audent Chambers LLC
Victor Leong	Audent Chambers LLC
Chew Kei-Jin	Ascendant Legal LLC
Samantha Ch’ng	Ascendant Legal LLC
Tyne Lam	Ascendant Legal LLC
Ayana Ki	Davinder Singh Chambers LLC
Eileen Yeo	Advocatus Law LLP
Lim Qiu’en	Damodara Ong LLC

4. Facts

The Bank provided banking facilities to Hin Leong for financing petroleum product purchases.
Three letters of credit (LCs) were issued to BP for purported gasoil purchases by Hin Leong.
Each purchase contract was back-to-back with a sale contract where Hin Leong sold the same gasoil back to BP at a higher price.
The Bank was unaware of the back-to-back nature of the transactions.
BP presented documents, including commercial invoices and letters of indemnity (LOIs), to receive payment under the LCs.
Hin Leong was placed under interim judicial management and later wound up.
Hin Leong's interim judicial managers reported irregularities, including fabricated documents and financing schemes with no commercial benefit.
The IJM Report stated that three of the transactions and corresponding LCs are the ones in respect of which the Bank had paid BP sums amounting to around US$125 million.

5. Formal Citations

Bank of China Ltd, Singapore Branch v BP Singapore Pte Ltd and others, Suit No 1126 of 2020 (Registrar’s Appeal Nos 65 and 66 of 2021), [2021] SGHC 120

6. Timeline

Date	Event
2020-04-17	OK Lim ceased being the managing director of Hin Leong Trading (Pte) Ltd and Ocean Tankers (Pte) Ltd.
2020-04-27	Hin Leong was placed under interim judicial management.
2020-06-22	Hin Leong’s interim judicial managers issued a report.
2020-08-07	Hin Leong was placed under judicial management.
2020-01-01	Suit No 1126 of 2020 filed.
2021-03-08	Hin Leong was wound up.
2021-04-28	Hearing date.
2021-05-31	Judgment reserved.

7. Legal Issues

Negligence
- Outcome: The court held that the Bank does have a reasonable cause of action in negligence against BP.
- Category: Substantive
- Sub-Issues:
  - Duty of care
  - Negligent misrepresentation
Fraud
- Outcome: The court agreed with the registrar that the Bank’s claim in fraud should not be struck out.
- Category: Substantive
- Sub-Issues:
  - Deceit
  - Fraudulent misrepresentation
  - Fraudulent intent
Conspiracy
- Outcome: The court agreed with the registrar that the Bank’s claim in conspiracy should not be struck out.
- Category: Substantive
- Sub-Issues:
  - Conspiracy to injure by unlawful means
Unjust Enrichment
- Outcome: The court considered that it is arguable that the grounds on which a bank could seek to recover payment from a beneficiary it has paid on an LC, are not limited to the grounds on which the bank could resist making payment.
- Category: Substantive
- Sub-Issues:
  - Mistake of fact
  - Failure of basis
Autonomy Principle
- Outcome: The court considered the effect of the autonomy principle is that an applicant (buyer) cannot prevent payment on the LC by pointing to a dispute with the beneficiary (seller) regarding the underlying sale contract.
- Category: Substantive

8. Remedies Sought

Rescission of the three LCs
Recovery of sums paid
Damages

9. Cause of Actions

Fraud
Negligence
Conspiracy
Unjust Enrichment

10. Practice Areas

Commercial Litigation
Banking Litigation
Fraud Litigation

11. Industries

Banking
Oil and Gas
Commodities Trading

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Tan Eng Khiam v Ultra Realty Pte Ltd	High Court	Yes	[1991] 1 SLR(R) 844	Singapore	Cited for the principle that pleaded facts are presumed to be true in favor of the plaintiff in a striking out application.
United City Merchants (Investments) Ltd v Royal Bank of Canada	House of Lords	Yes	[1983] 1 AC 168	England	Cited for the autonomy principle in letter of credit transactions.
Beam Technology (Mfg) Pte Ltd v Standard Chartered Bank	Court of Appeal	Yes	[2003] 1 SLR(R) 597	Singapore	Cited for the autonomy principle and the fraud exception in letter of credit transactions.
DBS Bank Ltd v Carrier Singapore (Pte) Ltd	High Court	Yes	[2008] 3 SLR(R) 261	Singapore	Discusses whether negligence is a basis for a bank to refuse payment under a letter of credit.
Bachmann Pty Ltd v BHP Power New Zealand Ltd	Court of Appeal of Victoria	Yes	[1999] 1 VR 420	Australia	Cited in relation to standby letters of credit and the independence principle.
PH Grace Pte Ltd and others v American Express International Banking Corp	High Court	Yes	[1985–1986] SLR(R) 979	Singapore	Cited for the principle that a beneficiary’s right to payment under an LC is regarded as the equivalent of cash in hand.
Niru Battery Manufacturing Co v Milestone Trading Ltd	English Court of Appeal	Yes	[2004] 1 Lloyd’s Rep 344	England	Cited for the principle that surveyors can be sued in negligence for issuing a negligent inspection certificate presented to obtain payment on an LC.
Montrod Ltd v Grundkotter Fleischvertriebs GmbH	Court of Appeal	Yes	[2002] 1 WLR 1975	England	Cited for the principle that a beneficiary could be under a duty of care in relation to documents that it has issued.
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency	Court of Appeal	Yes	[2007] 4 SLR(R) 100	Singapore	Cited for the applicable test or framework in Singapore for determining the imposition of a duty of care.
Chu Said Thong and another v Vision Law LLC	Court of Appeal	Yes	[2014] 4 SLR 375	Singapore	Cited for the applicable test or framework in Singapore for determining the imposition of a duty of care.
United City Merchants (Investments) Ltd v Royal Bank of Canada	English Court of Appeal	Yes	[1981] 3 WLR 242	England	Cited for the principle that a bank could refuse payment if it knew that a document presented for payment was forged.
Bocotra Construction Pte Ltd and others v Attorney-General	High Court	Yes	[1995] 2 SLR(R) 262	Singapore	Cited for the recognition in Singapore that unconscionability on the part of a beneficiary is a separate and distinct ground from fraud for restraining payment on a performance guarantee or bond.
Potton Homes Ltd v Coleman Contractors (Overseas) Ltd	Court of Appeal	Yes	(1985) 28 BLR 19	England	Cited for a dictum of Eveleigh LJ in relation to unconscionability.
Panatron Pte Ltd and another v Lee Cheow Lee and another	Court of Appeal	Yes	[2001] 2 SLR(R) 435	Singapore	Cited for the elements of a claim in deceit.
Kim Hock Yung and others v Cooperative Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank) (Lee Mon Sun, third party)	High Court	Yes	[2000] 2 SLR(R) 455	Singapore	Cited for the principle that it is not enough merely to plead that a false statement has been made, without there also being a sufficient pleading of the alleged fraudulent intent.
Thai Chee Ken and others (Liquidators of Pan-Electric Industries Ltd) v Banque Paribas	High Court	Yes	[1992] 1 SLR(R) 280	Singapore	Cited for the principle that the court will have to ascertain the true nature and substance of the transactions.
Thai Chee Ken and others (Liquidators of Pan-Electric Industries Ltd) v Banque Paribas	Court of Appeal	Yes	[1993] 1 SLR(R) 871	Singapore	Cited for the principle that the court will have to ascertain the true nature and substance of the transactions.
Re Curtain Dream	Unknown	Yes	[1990] BCLC 925	England	Cited for the facts where the court concluded that the purported sale and repurchase there was in substance a loan.
Derry v Peek	House of Lords	Yes	(1889) 14 App Cas 337	England	Cited for its holding that in an action of deceit the plaintiff must prove actual fraud.
Antariksa Logistics Pte Ltd and others v Nurdian Cuaca and others	High Court	Yes	[2018] 3 SLR 117	Singapore	Cited for the principle that in order for a company to be fixed with the requisite intention or state of mind for conspiracy, it is necessary to pinpoint some human actor with that state of mind and to determine whether, as a matter of law, that state of mind may be attributed to the company.
The Dolphina	High Court	Yes	[2012] 1 SLR 992	Singapore	Cited for the issue of whether the knowledge of a member of the board of directors could be attributed to the defendant company.
Mees Pierson NV v Bay Pacific (S) Pte Ltd and others	High Court	Yes	[2000] 2 SLR(R) 864	Singapore	Discusses a claim of unjust enrichment where the beneficiary had innocently presented documents to the bank.
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another	Court of Appeal	Yes	[2013] 3 SLR 801	Singapore	Cited for well-established unjust factors under the law of unjust enrichment: mistake of fact and absence/failure of basis.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 18 r 19(1)(a)
Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 18 r 19(2)

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 157(1)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Letter of credit
Back-to-back transaction
Letter of indemnity
Interim judicial management
Fictitious Purchase Scheme
Autonomy principle
Commercial invoice
Shipping documents
Negligent misrepresentation
Fraudulent intent
Unjust enrichment
Duty of care

15.2 Keywords

Letter of credit
Fraud
Negligence
Singapore
Banking
Hin Leong
BP Singapore
Bank of China
Commercial dispute
Documentary credit
Pleadings
Striking out

16. Subjects

Banking
Finance
Civil Procedure
International Trade
Documentary Credits

17. Areas of Law

Civil Procedure
Pleadings
Bills of Exchange
Negotiable Instruments
Letter of Credit Law
Contract Law
Banking Law
Fraud Law
Negligence Law
Unjust Enrichment