Winson Oil v OCBC & Standard Chartered: Fraud Exception in Letter of Credit Transactions

The Singapore Court of Appeal heard appeals by Winson Oil Trading Pte Ltd against Oversea-Chinese Banking Corporation Limited (OCBC) and Standard Chartered Bank (Singapore) Limited (SCB), concerning the banks' refusal to pay under letters of credit. The banks argued that the Fraud Exception applied, as Winson made false representations in its Letters of Indemnity (LOIs). The Court of Appeal dismissed Winson's appeals, holding that recklessness constitutes fraud in letter of credit transactions, and that Winson did not honestly believe in the truth of its representations.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeals dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal clarifies the Fraud Exception in letter of credit transactions, affirming that recklessness constitutes fraud. Appeals dismissed.

1.7 Decision Date

20 August 2024

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Oversea-Chinese Banking Corporation Limited	Respondent, Defendant	Corporation	Appeal dismissed	Won	Soon Wen Qi Andrea of WongPartnership LLP Felicia Soong Wanyi of WongPartnership LLP Tan Kai Yun of WongPartnership LLP Tan Chee Meng of WongPartnership LLP Manoj Pillay Sandrasegara of WongPartnership LLP Hudson Wong of WongPartnership LLP
Winson Oil Trading Pte Ltd	Appellant, Plaintiff	Corporation	Appeal dismissed	Lost	Kenneth Tan of Kenneth Tan Partnership Bazul Ashhab bin Abdul Kader of Oon & Bazul LLP Lua Jing Ing Priscilla of Oon & Bazul LLP Prakaash s/o Paniar Silvam of Oon & Bazul LLP Caleb Tan Jia Chween of Oon & Bazul LLP Levin Lin Yok Yan of Oon & Bazul LLP Kirsten Siow of Oon & Bazul LLP Oommen Mathew of Omni Law LLC See Wern Hao of Omni Law LLC
Standard Chartered Bank (Singapore) Limited	Respondent, Defendant	Corporation	Appeal dismissed	Won	Sarjit Singh Gill of Shook Lin & Bok LLP Daryl Cheng On Lun of Shook Lin & Bok LLP Suresh Viswanath of Shook Lin & Bok LLP

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Steven Chong	Justice of the Court of Appeal	Yes
Belinda Ang Saw Ean	Justice of the Court of Appeal	No

4. Counsels

Counsel Name	Organization
Soon Wen Qi Andrea	WongPartnership LLP
Felicia Soong Wanyi	WongPartnership LLP
Tan Kai Yun	WongPartnership LLP
Tan Chee Meng	WongPartnership LLP
Manoj Pillay Sandrasegara	WongPartnership LLP
Hudson Wong	WongPartnership LLP
Kenneth Tan	Kenneth Tan Partnership
Bazul Ashhab bin Abdul Kader	Oon & Bazul LLP
Lua Jing Ing Priscilla	Oon & Bazul LLP
Prakaash s/o Paniar Silvam	Oon & Bazul LLP
Caleb Tan Jia Chween	Oon & Bazul LLP
Levin Lin Yok Yan	Oon & Bazul LLP
Kirsten Siow	Oon & Bazul LLP
Oommen Mathew	Omni Law LLC
See Wern Hao	Omni Law LLC
Sarjit Singh Gill	Shook Lin & Bok LLP
Daryl Cheng On Lun	Shook Lin & Bok LLP
Suresh Viswanath	Shook Lin & Bok LLP

4. Facts

Winson Oil Trading Pte Ltd is an energy trading company.
OCBC and SCB issued letters of credit to Winson on Hin Leong's application.
The letters of credit were to finance Hin Leong’s purchase of gasoil from Winson.
Winson made presentations to OCBC and SCB under Letters of Indemnity (LOIs).
OCBC and SCB refused to pay under the letters of credit, alleging no cargo was shipped and the Bills of Lading (BLs) were forgeries.
Winson brought suits against OCBC and SCB for payment of the sums under the letters of credit.
The High Court dismissed Winson’s claim on the basis that the Fraud Exception had been made out.

5. Formal Citations

Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another appeal, Civil Appeal No 40 of 2023, [2024] SGCA 31
Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another appeal, Civil Appeal No 41 of 2023, [2024] SGCA 31
Winson Oil Trading Pte Ltd v Oversea-Chinese Banking Corp Ltd and another suit, , [2023] SGHC 220

6. Timeline

Date	Event
1889-01-01	Derry v Peek decision
2020-03-27	Subject Transactions took place
2020-04-02	SCB issued letter of credit to Winson
2020-04-06	OCBC issued letter of credit to Winson
2020-04-07	Winson made first presentation to OCBC under LOI for Ocean Voyager
2020-04-09	Winson made first presentation to SCB under LOI for Ocean Taipan
2020-04-15	OCBC rejected Winson’s first presentation
2020-04-16	Winson made second presentation to OCBC for Ocean Taipan
2020-04-21	Winson made second presentation to SCB for Ocean Voyager
2020-04-21	Winson emailed OCBC to explain internal mix-up
2020-04-01	SCB and OCBC refused to pay under the letters of credit
2020-01-01	Winson brought suits against OCBC and SCB
2023-01-01	High Court dismissed Winson’s claim against OCBC and SCB
2024-06-28	Judgment reserved
2024-08-21	Judgment delivered

7. Legal Issues

Fraud Exception
- Outcome: The Court of Appeal held that recklessness constitutes fraud for the purposes of the Fraud Exception in letter of credit transactions.
- Category: Substantive
- Sub-Issues:
  - Recklessness as a form of fraud
  - Absence of belief in truth
- Related Cases:
  - (1889) 14 App Cas 337
  - [2022] 4 SLR 1
  - [2016] 3 SLR 557
Nullity Exception
- Outcome: The Court of Appeal did not make a definitive ruling on the Nullity Exception, leaving the issue to be decided in a future case.
- Category: Substantive
- Related Cases:
  - [2003] 1 SLR(R) 597

8. Remedies Sought

Payment under Letters of Credit
Monetary Damages

9. Cause of Actions

Breach of Contract
Enforcement of Letter of Credit

10. Practice Areas

Commercial Litigation
Banking Litigation
Letter of Credit Disputes

11. Industries

Banking
Oil and Gas
Commodities Trading

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Derry v Peek	N/A	Yes	(1889) 14 App Cas 337	N/A	Cited for the test for fraud, including knowingly, without belief in its truth, or recklessly careless whether it be true or false.
Credit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suit	Singapore International Commercial Court	No	[2022] 4 SLR 1	Singapore	Cited as holding that the Fraud Exception does not apply if a false representation was made recklessly without caring whether it is true or false; the Court of Appeal disagreed with this holding.
Arab Banking Corp (B.S.C.) v Boustead Singapore Ltd	Court of Appeal	Yes	[2016] 3 SLR 557	Singapore	Cited as accepting that recklessness under the third category of fraud in Derry v Peek engages the Fraud Exception in the context of demand guarantees.
Montrod Ltd v Grundkotter Fleischvertriebs GmbH	N/A	No	[2002] 1 WLR 1975	N/A	Cited by Winson in arguing that the Nullity Exception should not be recognised.
Beam Technology (Mfg) Pte Ltd v Standard Chartered Bank	N/A	No	[2003] 1 SLR(R) 597	Singapore	Cited for the Nullity Exception, which Winson argues is a limited one and did not apply on these facts.
UniCredit Bank AG v Glencore Singapore Pte Ltd	Court of Appeal	Yes	[2023] 2 SLR 587	Singapore	Cited for the principle that the court will not assist a fraudster in his/her fraud.
Pillans v Man Mierop	N/A	No	(1765) 97 ER 1035	N/A	Cited as an early suggestion that fraud would not be tolerated even in the context of letters of credit.
Angelica-Whitewear Ltd v Bank of Nova Scotia	Supreme Court of Canada	No	[1987] 1 SCR 59	Canada	Cited for the balancing act between not facilitating fraud and ensuring confidence in the operation of letters of credit transactions.
Sztejn v J Henry Schroder Banking Corp	N/A	No	31 NYS 2d 631 (1941)	New York	Cited as the foundational case that set out the ambit of the Fraud Exception.
United City Merchants and others v Royal Bank of Canada and others	N/A	No	[1983] 1 AC 168	N/A	Cited for Lord Diplock's formulation of the Fraud Exception.
Brody, White and Co Inc v Chemet Handel Trading (S) Pte Ltd	Court of Appeal	Yes	[1992] 3 SLR(R) 146	Singapore	Cited for establishing that fraud in the underlying transaction would not engage the Fraud Exception, and what is required is fraud on the documents.
Law Society of Singapore v Udeh Kumar s/o Sethuraju and another matter	N/A	No	[2017] 4 SLR 1369	Singapore	Cited as an example of the categories of common law fraud identified in Derry v Peek being used in other contexts apart from the tort of deceit.
Public Prosecutor v Wang Ziyi Able	N/A	No	[2008] 2 SLR(R) 61	Singapore	Cited as an example of the categories of common law fraud identified in Derry v Peek being used in other contexts apart from the tort of deceit.
Barings plc and another v Coopers and others	N/A	No	[2002] All ER (D) 309	N/A	Cited for the definition of recklessness as indifference to the truth.
Le Lievre and Dennes v Gould	N/A	No	[1893] 1 QB 491	N/A	Cited for the definition of recklessness as dishonesty in not caring about the truth of a statement.
Chu Said Thong and another v Vision Law LLC	N/A	No	[2014] 4 SLR 375	Singapore	Cited for the subjective nature of recklessness in the Derry v Peek sense.
R v Caldwell	N/A	No	[1982] 1 AC 341	N/A	Cited for the definition of objective recklessness.
Panatron Pte Ltd and another v Lee Cheow Lee and another	N/A	No	[2001] 2 SLR(R) 435	Singapore	Cited for the finding that the second category in Derry v Peek encompasses the third category.
Montrod Ltd v Grundkotter Fleischvertriebs GmbH	N/A	No	[2001] 1 All ER (Comm) 368	N/A	Cited as an example of the principle of autonomy for letters of credit.
DBS Bank Ltd v Carrier Singapore (Pte) Ltd	N/A	No	[2008] 3 SLR(R) 261	Singapore	Cited as an example of the principle of autonomy for letters of credit.
Edward Owen Engineering Ltd v Barclays Bank International Ltd	N/A	No	[1978] QB 159	N/A	Cited as the English law decision that first applied the Fraud Exception in the context of performance bonds.
Boustead Singapore Ltd v Arab Banking Corp (B.S.C.)	N/A	No	[2015] 3 SLR 38	Singapore	Cited for the High Court decision in Arab Banking.
GKN Contractors Ltd v Lloyd’s Bank plc	N/A	No	(1986) 30 BLR 48	N/A	Cited for the holding that the Fraud Exception requires something in the nature of common law fraud.
Tetronics (International) Ltd v HSBC Bank plc and another	N/A	No	[2018] 1 BLR 450	N/A	Cited as a more recent English case where the Fraud Exception applied.
JBE Properties Pte Ltd v Gammon Pte Ltd	Court of Appeal	No	[2011] 2 SLR 47	Singapore	Cited for the explanation that a performance bond is merely security for the secondary obligation of the obligor.
Chartered Electronics Industries Pte Ltd v Development Bank of Singapore	N/A	No	[1992] 2 SLR(R) 20	Singapore	Cited for the observation that a performance guarantee was merely a security and did not perform the same function as a letter of credit.
Royal Bank of Canada v Darlington	N/A	No	[1995] OJ No 1044	Ontario	Cited as a foreign jurisprudence that supports adopting Derry v Peek fraud under the Fraud Exception in the context of letters of credit.
Tukan Timber Ltd v Barclays Bank Plc	N/A	No	[1987] 1 Lloyd’s Rep 171	N/A	Cited as a case where the English High Court held that the forgery was so crude and manifest that the beneficiary could not have honestly believed that the document was valid.
Gimpex Ltd v Unity Holdings Business Ltd and others and another appeal	N/A	No	[2015] 2 SLR 686	Singapore	Cited for the principle that the court should not normally exercise its discretion to exclude evidence that is declared to be admissible by the Evidence Act.
Velstra Pte Ltd v Dexia Bank NV	N/A	No	[2005] 1 SLR(R) 154	Singapore	Cited for the principle that for a hearsay statement to be admissible under s 32(1)(c) of the Evidence Act, it must be shown that the person who made it was conscious that what he said was against his own interest.
The Law Society of Singapore v Lee Suet Fern (Lim Suet Fern)	N/A	No	[2020] SGDT 1	Singapore	Cited for the principle that correspondence in the course of a person’s profession as a solicitor can be a statement made in the ordinary course of a trade, business, profession or other occupation.
Raj Kumar s/o Aiyachami v Public Prosecutor and another appeal	N/A	No	[2022] 2 SLR 676	Singapore	Cited for the rationale behind s 32(1)(c) of the Evidence Act.
UniCredit Bank AG v Glencore Singapore Pte Ltd	N/A	No	[2022] SGHC 263	Singapore	Cited for the principle that circular chains of transactions are not ipso facto shams.
Banque de Commerce et de Placements SA, DIFC Branch & Anor v China Aviation Oil (Singapore) Corporation Ltd	N/A	No	[2024] SGHC 145	Singapore	Cited for the suggestion that the elements of the tort of deceit remain applicable to invoke the fraud exception.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Evidence Act 1893	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Letter of Credit
Fraud Exception
Autonomy Principle
Bills of Lading
Letters of Indemnity
Recklessness
Documentary Credit
Hin Leong
Trafigura
Nullity Exception

15.2 Keywords

letter of credit
fraud exception
recklessness
Winson Oil
OCBC
Standard Chartered
Singapore
banking
trade finance

17. Areas of Law

Area Name	Relevance Score
Letter of Credit Law	95
Fraud and Deceit	90
Commercial Disputes	75
Contractual terms	60
Banking and Finance	50
Arbitration	30

16. Subjects

Letter of Credit Transactions
Banking
International Trade
Fraud