Singapore Judge Reverses Trial Court Decision in Cargo Misdelivery Case

In Standard Chartered Bank (Singapore) Ltd v. Maersk Tankers Singapore Pte. Ltd., [2022] SGHC 242 decided 27 September 2022, High Court Judge Ang Cheng Hock reversed the trial court decision granting summary judgment for Standard Chartered and found that Maersk has raised triable issues as to whether the bank suffered any recoverable loss due to misdelivery of gasoil cargo to failed oil trader Hin Leong Trading.

In March 2020, Standard Chartered issued a letter of credit for more than USD 6.1 million on behalf of Hin Leong Trading in favor of Winson Oil Trading. Terms of the LC backing the purchase of gasoil stipulated that payment would be made by Standard Chartered on presentation by Winson Oil of, among other documents, a set of original bills of lading. In the event that the original BLs were not available, then payment would be effected against Winson Oil’s commercial invoice and a letter of indemnity issued by Winson Oil.

Winson Oil presented Standard Chartered with a complying commercial invoice and LOI. Standard Chartered subsequently honored. Months later, Winson Oil furnished Standard Chartered with the full set of original B/Ls. On the basis that it was the lawful holder of the B/Ls and entitled to delivery of the gasoil, Standard Chartered demanded delivery of the cargo from Maersk. Maersk had discharged the cargo at the Universal Terminal, Singapore months earlier without production of the B/Ls.

Standard Chartered and Winson Oil subsequently entered into an escrow agreement pursuant to which Winson Oil provided security for Standard Chartered’s claim against Maersk for misdelivery of the cargo. As explained in the case, “This was because [Winson Oil] had also issued a separate indemnity to [Maersk] in respect of the delivery of the Gasoil Cargo to [Hin Leong].”

In October 2021, Standard Chartered sued Maersk for damages for breach of the contract of carriage resulting from Maersk’s misdelivery. The trial court entered interlocutory judgment with damages to be assessed and denied Maersk unconditional leave to defend against Standard Chartered’s claim.

In granting the appeal and setting aside the trial court order, Judge Ang found that “there are clearly triable issues in relation to the financing and security arrangements between [Standard Chartered] and [Hin Leong] that must be investigated at trial. That would allow the court to determine, with the necessary certainty, whether [Standard Chartered] did in fact regard the Bills of Lading in this case as security for its financing, or whether it was always prepared to assume the credit risk of [Hin Leong] on an unsecured basis.”

“That [Standard Chartered] was willing to permit payment under the LC without presentation of the Bills of Lading by [Winson Oil], but against, inter alia, the LOI, also raises a triable issue as to [Standard Chartered’s] intentions in relation to the Gasoil Cargo and the Bills of Lading.”

Judge Ang then referenced wording from the LOI which Maersk argues that Standard Chartered “was clearly prepared to accept the scenario where the Gasoil Cargo would be delivered to [Hin Leong] without presentation of the Bills of Lading, and as such, [Standard Chartered] never looked to the Bills of Lading as security.” He said: “I agree that this raises questions that can only be properly answered after a trial.”

Judge Ang went on to state: “I should also add that the issue is further complicated by the fact that [Hin Leong] was a long-standing customer of [Standard Chartered], and the issue of what [Standard Chartered] knew about [Hin Leong’s] intentions regarding the Gasoil Cargo must also be investigated.”