High Court dismisses Winson’s claim against OCBC and StanChart on invalid letters of credit
Mia Pei
WINSON Oil Trading’s claim against OCBC and Standard Chartered (StanChart) for a total of US$60.9 million was dismissed by the judge of the High Court on Friday (Aug 18).
The ruling came after the court established “fraud exception” to determine that the Singapore oil trader had prepared its letters of indemnity to the banks for payment under letters of credit (LCs) based on forged bills of lading (BLs), knowingly or without belief in its truth.
The banks are entitled to their costs, to be assessed if not fixed or agreed, the judge noted.
Based on Winson’s claims, the company had sold gasoil to collapsed oil trader Hin Leong Trading, in transactions which the banks had purportedly issued LCs for.
The shipped cargo was said to comprise 785,997 barrels of diesel on board the Ocean Voyager and 786,022 barrels of the same diesel on board the Ocean Taipan.
Hin Leong, had, however, sold the same cargo to more than one party for its own financing purposes. No evidence had shown that Hin Leong bought back the cargo from the buyer before selling it to another buyer.
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The High Court found that Hin Leong attempted to use the funds “purely for financing purposes” by discounting sales invoices or negotiating LCs, before repaying the banks for its purchases.
As a result, the BLs were signed by a staff member of Hin Leong in a scheme to sell cargo that had already been sold, and then to buy the cargo back from a subsequent buyer to obtain financing.
This rendered the BLs that Winson used to base its LCs, and subsequent claims on, invalid.
The case can be traced back to June 2020, when Winson sued OCBC and StanChart for failing to pay US$30.4 million each from the respective LCs they issued to finance the diesel trade for Hin Leong. This followed the collapse of Hin Leong on Apr 17, 2020.
The Singapore oil trader’s bankruptcy filing, after its founder Lim Oon Kuin – also known as OK Lim – admitted that the company hid millions in losses and unloaded fuel pledged for loans, marked one of the largest collapses of an oil trading firm in the world.
Some 23 banks, including OCBC, are owed almost US$4 billion by the trader as at its bankruptcy.
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