A court in Singapore has dashed Standard Chartered’s hopes of a quick legal victory in its claim against shipping giant Maersk over a US$6.1mn cargo of oil mis-delivered to collapsed trader Hin Leong.
The Singapore High Court on September 27 set aside a lower court’s earlier award of summary judgement in favour of the London-headquartered bank.
The case is among several grinding through the courts, primarily in the Asian trading hub of Singapore, following a spate of high-profile implosions of commodities traders during the first few months of the Covid-19 pandemic.
In this case, Standard Chartered claims Maersk mis-delivered a cargo of gasoil from Winson Oil to Hin Leong in late February 2020 without the original bills of lading. The bank had paid Winson US$6.1mn under a letter of credit (LC) applied for by Hin Leong.
Hin Leong, which had a broader trade finance facility in place with Standard Chartered, did not repay the amount and the trader collapsed shortly after the delivery. The trader’s founder has since faced charges of widespread fraud although allegations of wrongdoing have not been made against it by the parties in this case.
After finally receiving the bills of lading from Winson in mid-2020, Standard Chartered demanded that Maersk pay the sum to it owed by Hin Leong.
While the lower court had earlier ruled that Maersk has no reasonable prospect of mounting a defence against Standard Chartered’s claim at trial, High Court judge Ang Cheng Hock sided with the shipping company, finding that there are severable “triable” issues relating to Standard Chartered’s financing of the specific oil cargo at the heart of the dispute and the broader financing facility.
According to the judgement, Maersk argued that “there are various indicia which point towards the plaintiff never having regarded the bills of lading as security for the financing granted to Hin Leong”.
“This meant that the effective or proximate cause of the plaintiff’s loss was not the misdelivery by the defendant [Maersk] of the gasoil cargo to Hin Leong without presentation of the bills of lading. Instead, it was the insolvency of Hin Leong and the way in which the plaintiff’s [Standard Chartered] financing arrangements were structured,” the judgement summarises the shipping company as saying.
While stressing that he has “not determined in any way the various contentions of the parties on the merits of the claim”, Justice Ang decided that Maersk had successfully argued that its contentions should be explored at a trial.
A question of knowledge
Hin Leong’s letter of credit application to the bank, submitted on March 3, 2020, had a “last delivery date” for the cargo of February 29, according to the judgement.
Maersk seized on this to argue that the bank knew the cargo had already been delivered when it issued the letter of credit. The bank denies this, saying the wording of the application was unclear.
Justice Ang wrote in his judgement that a trial should explore whether Standard Chartered had knowledge that the cargo had already been discharged.
He noted that as Hin Leong was a longstanding customer of the bank, it “might well have been aware” that the cargo was intended to be stored, which “might possibly explain why the plaintiff did not appear to be concerned” that the delivery date on the letter of credit application had already passed.
The judge also agreed with Maersk that a trial should explore whether Standard Chartered actually intended for the loan under of the letter of credit to be secured by the original bills of lading.
Justice Ang noted that the facility the letter of credit was issued under was described as “unsecured”, and allowed Hin Leong to use LCs to purchase cargoes without an onward buyer up to an aggregate limit of USD80mn – although the bank’s lawyers submitted that the terms of the facility still required bills of lading to “pass through” the bank.
The judgement also points out that Standard Chartered did not ask for any further security when allowing Hin Leong to effectively extend its loan by another month.
The assistant registrar presiding in the lower court had previously found that Standard Chartered’s agreement to allow discharge against a letter of indemnity did not mean that the bank had given up its right to demand delivery of the cargo when the bills of lading were presented.
But Justice Ang wrote that a trial should examine Maersk’s claim that the lender’s later demand for the bills of lading from Winson was “contrived, coming only after [Hin Leong] was in financial difficulties and where the prospects of recovery had been preliminarily assessed at 18%”, and that the bank “never had any intention to call on or demand for the [gasoil cargo] and was now effectively looking to lay its losses at [the defendant’s] feet”.
Winson endorsed the bills of lading to the bank’s order in August 2020.
The judge also found in favour of Maersk’s submission that the wording of the letter of indemnity issued by Winson should also be dissected at a trial.
The letter of indemnity, according to the judgement, contained a clause that explicitly excluded any “benefit or remedy” to a third party, such as a bank.
Representatives of Maersk and Standard Chartered did not immediately respond to requests for comment.
The dispute between Standard Chartered and Maersk echoes similar cases arising from mis-deliveries in 2020, including a claim in Singapore by the Oversea-Chinese Banking Corporation (OCBC), also involving Hin Leong and Winson Oil. In that case, a judge earlier this year denied OCBC’s request for summary judgement and found that the matter should go to trial.
The judgement also drew on a decision by the High Court of England and Wales this year to reject a claim by Italian lender Unicredit against shipping company Euronav for US$24.7mn in damages over an alleged misdelivery of oil on a vessel chartered by Gulf Petrochem, another trader that collapsed in 2020.
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