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Grounds publishedDecided 5 Jun 2024
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General Division of the High Court

Banque de Commerce et de Placements SA, DIFC Branch and another v China Aviation Oil (Singapore) Corp Ltd (Shandong Energy International (Singapore) Pte Ltd, third party; Golden Base Energy Pte Ltd, fourth party)

[2024] SGHC 145Case no. Suit No 675 of 2020

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  1. Introduction

  2. [1] The plaintiffs are the first plaintiff, Banque de Commerce et de Placements SA, DIFC Branch (“BCP Dubai”), and the second plaintiff, Banque de Commerce et de Placements SA (“BCP Geneva”) (collectively, and in the singular, “BCP”). The dispute in this case centres on Letter of Credit No GE-157465/AJP (the “LC”) issued by BCP Geneva.

  3. [2] I first set out, for broad context, the main contours of the dispute surrounding the LC. Essentially, the LC was a payment mechanism for Zenrock Commodities Trading Pte Ltd (“Zenrock”) (which has since gone into liquidation and is not a party to the present proceedings), to purchase a cargo from China Aviation Oil (Singapore) Corporation Ltd (“CAO”), the defendant. To that end, BCP Geneva issued the LC naming CAO as the beneficiary. After the sale of the cargo was completed, CAO presented a letter of indemnity and an invoice to the confirming bank, UBS Switzerland AG (“UBS”). Pursuant to the LC, UBS paid out moneys to CAO, and BCP Geneva reimbursed UBS for the same. BCP now seeks to recover the moneys from CAO on various grounds. For convenience, I shall term BCP’s claim against CAO as the “Main Proceedings”.

  4. [3] CAO resists BCP’s claim against it in the Main Proceedings. However, should BCP succeed in the Main Proceedings, CAO has brought third party proceedings (“3PP”) against the third party, Shandong Energy International (Singapore) Pte Ltd (“SEIS”), to seek recovery from SEIS in various causes of action. In turn, should CAO succeed in the 3PP, SEIS has brought fourth party proceedings (“4PP”) against the fourth party, Golden Base Energy Pte Ltd (“GBE”), to seek recovery from GBE in various causes of action. Broadly speaking, these actions arise because the cargo allegedly passed from GBE to SEIS to CAO to Zenrock in a chain of related contracts which each contained indemnities given by each preceding party to each immediately subsequent party in the chain. I elaborate more on this later.

  5. [4] Having taken some time to consider the matter, I dismiss BCP’s claim against CAO in the Main Proceedings. It follows that I do not need to deal substantively with the 3PP and the 4PP, which I dismiss on the basis that they are dependent on BCP succeeding in its claim against CAO and that BCP has not so succeeded. For reasons that I will elaborate on below, the main reason being that I find the contract between CAO and Zenrock not to be a sham or fraudulent transaction, I dismiss BCP’s claims against CAO. In my view, BCP has failed to show: (a) that CAO is liable in either fraudulent or negligent misrepresentation; (b) that CAO breached any contract between the parties; (c) that CAO was unjustly enriched at its expense; and (d) that CAO had engaged in an unlawful means conspiracy against it.

  6. The background facts

  7. [5] I now turn to the background facts against which the present dispute arose. In doing so, I am not necessarily making findings of fact. Rather, I set out the parties’ contended-for positions where relevant so that the paragraphs following this section are more comprehensible.

  8. The LC and the underlying sale contracts

  9. [6] On or around 21 January 2020, BCP agreed to provide financing to Zenrock for its purported purchase of approximately 260,000 barrels (+/- 5%) of gasoil 500 parts per million sulphur (the “Cargo”) from CAO. BCP had agreed to do so based on, among other things, Zenrock’s representation that the Cargo would be on-sold to PetroChina International (East China) Co Ltd (“PetroChina”). As such, from BCP’s perspective, the transaction would be a “self-liquidating” one, in that BCP’s exposure under the LC would be secured by an assignment of receivables due to Zenrock under the latter’s sale of the Cargo to PetroChina.

  10. [7] In furtherance of this arrangement, on 23 January 2020, BCP Geneva issued the LC for the sum of US$20,500,000, with CAO named as the beneficiary. As CAO did not consider BCP Geneva to be an “investment-graded” bank, CAO required that the LC be confirmed by UBS, to whom it was available by deferred payment. On 30 January 2020, the LC was eventually confirmed by UBS.

  11. [8] In the circumstances, the LC was the payment mechanism for Zenrock to pay CAO the price of the Cargo, which CAO sold to Zenrock on Free-on-Board (“FOB”) Melaka terms under a sale contract dated 21 January 2020 (the “CAO-ZR Contract”). The shipment date of the Cargo was to be 24 to 26 January 2020. CAO had entered into the CAO-ZR Contract on back-to-back terms, having bought the Cargo from SEIS under a contract dated 21 January 2020 (the “CAO-SEIS Contract”). According to CAO, it had entered into both of these contracts at Zenrock’s request for it to act as an intermediary. This was because SEIS had only been prepared to offer Zenrock 10-day credit terms, whereas Zenrock wanted to buy the Cargo on 45-day credit terms. By bridging this gap, CAO earned a modest profit of US$62,254.32.

  12. The terms of the LC

  13. [9] The LC incorporates provisions of the current version of the Uniform Custom and Practice for Documentary Creditors developed by the International Chamber of Commerce (“UCP 600”) and was available by deferred payment with UBS 45 days after the bill of lading (“BL”) date.

  14. [11] Further, Field 47A(10) of the LC provided that in the event that the original shipping documents set out at Field 46A(2) to (5) were not available at the time of presentation, CAO could claim payment under the LC by presenting the CAO Invoice and its letter of indemnity in the form set out at Field 47A(10) (the “CAO LOI”). The agreed text of the CAO LOI required CAO to, among other things, represent and warrant the existence, authenticity, and validity of the BCP OBLs.

  15. [12] Finally, Field 78 of the LC provides that:

  16. CAO’s performance of the sale contracts

  17. [13] Since CAO, on its case, believed that there was physical shipment and delivery of the Cargo, it proceeded to perform the sale contracts. In particular, CAO avers that its operator, Ms Chng Chai Ling, Cindy (“Ms Chng”), proceeded to attend to the various operational aspects of the transaction. These included: (a) the appointment of independent cargo surveyors, Inspectorate Malaysia Sdn Bhd (“Inspectorate”), at the load port; and (b) the monitoring of the loading of the Cargo on board the performing vessel, “Petrolimex 18”, which Zenrock, as FOB buyer, had nominated to CAO. Ms Chng received daily updates from Inspectorate between 23 and 27 January 2020. For clarity, this was the only instance of physical loading of the Cargo on board “Petrolimex 18”. This is important because in the various contracts of sale, the point in time when title passed was when the Cargo passed the flange connection between the delivery hose at the loading port and the “Petrolimex 18’s” permanent hose connection (or, described loosely, when the Cargo was loaded onto the ship).

  18. [15] On 5 February 2020, CAO received SEIS’s invoice (the “SEIS Invoice”) and LOI (the “SEIS LOI”). The SEIS LOI provided that SEIS had been unable to provide CAO with the full set of 3/3 original bills of lading and other shipping documents. Despite this, Ms Chng believed that SEIS had sold and transferred title in the Cargo to CAO. She therefore prepared the CAO Invoice and the CAO LOI on 6 February 2020. CAO’s Head of Operations, Mr Jason Wong (“Mr Wong”), signed the CAO Invoice, while its Chief Financial Officer, Mr Xu Guohong, and its Deputy Head of Finance, Mr Koh Jia Mian, signed the CAO LOI.

  19. [16] The CAO Invoice and the CAO LOI were addressed to Zenrock and presented to UBS. The CAO LOI, which was in the format as laid out in Schedule A to the CAO-ZR Contract, provides as follows:

  20. CAO’s presentation of the compliant documents to UBS

  21. [17] On or around 14 February 2020, CAO presented the CAO Invoice and the CAO LOI, which were on their face compliant with the terms of the LC, to UBS to receive payment under the LC. UBS later forwarded these documents to BCP Geneva. BCP Geneva paid out, under the LC, the sum of US$19,091,491.80 on 12 March 2020, which is 45 days after the BL date of 27 January 2020. On the same day, CAO also received payment under the LC from UBS in the sum of US$19,051,378.28. Before that, CAO paid SEIS the price of the Cargo under the CAO-SEIS Contract on 6 February 2020.

  22. BCP’s decision to commence the Main Proceedings against CAO

  23. [18] Given BCP’s expectation that it would be reimbursed by PetroChina, it wrote to PetroChina to request for payment. However, on or around 29 April 2020, PetroChina informed BCP that the sale contract between Zenrock and PetroChina had been “cancelled”, such that PetroChina was under “no obligation to make payment”. BCP was also provided with a “Tripartite Agreement” between Zenrock, GBE, and PetroChina, supposedly dated 20 January 2020. The Tripartite Agreement purported to absolve PetroChina from any liability if it did not receive payment from GBE, or if it failed to receive the Cargo from Zenrock. Further, the Tripartite Agreement also purported to grant PetroChina the unilateral right to terminate either of its contracts with Zenrock or GBE without any consequence.

  24. [19] From May 2020, Zenrock was placed under judicial management and then into liquidation. In particular, BCP discovered during these insolvency proceedings, among other things, that: (a) the CAO-ZR Contract was allegedly a sham or fraudulent transaction; (b) CAO allegedly did not sell and/or deliver the Cargo to Zenrock; and (c) there were no BCP OBLs in existence. Instead, the Cargo that had been loaded on “Petrolimex 18” had allegedly been purchased by Zenrock from Petco, and then on-sold to Petrolimex Singapore Pte Ltd (“Petrolimex”).

  25. [20] It was against this background that BCP decided to claim for its loss, being the sum disbursed under the LC, from CAO. Thus, on 29 May 2020, BCP’s lawyers first wrote to CAO, alleging that BCP had “reason to believe” that CAO had not transferred title in the Cargo to Zenrock, and demanding that CAO provide BCP with the BCP OBLs. Eventually, BCP commenced the Main Proceedings against CAO on 30 December 2020. This, in turn, set off a chain of actions, namely, the 3PP against SEIS, and the 4PP against GBE.

  26. The parties’ general cases

  27. [21] I turn now to the parties’ general cases.

  28. BCP’s case against CAO

  29. [22] The crux of BCP’s case against CAO is that the CAO-ZR Contract was a sham and/or fraudulent transaction. As such, BCP alleges that CAO did not sell any physical Cargo to Zenrock. BCP further alleges that the other parties in this chain of transactions, which it has termed “Series B”, likewise did not sell or deal with any physical Cargo. Instead, Series B “was merely a financial arrangement for the benefit of, inter alia, [CAO]”. For convenience, I set out a graphical representation of part of Series B, which makes clear that Series B forms a circle:

  30. Series B: Zenrock → GBE → SEIS → CAO → Zenrock

  31. [23] Instead of Series B, BCP pleads that the physical delivery of the Cargo only took place in a series of transactions that it has termed as “Series A”. In Series A, Zenrock purchased the Cargo from Petco, and then sold the Cargo to Petrolimex. Again, for convenience, I set out a graphical representation of Series A:

  32. Series A: Petco → Zenrock → Petrolimex

  33. [25] From this position, BCP claims against CAO for the following causes of action, which I will elaborate at the appropriate junctures:

  34. CAO’s case in response to BCP

  35. [26] For its part, CAO’s position is that it reasonably believed that there was physical shipment and delivery of the Cargo, and that the Representations and Warranties were true. CAO had entered into the CAO-SEIS Contract and the CAO-ZR Contract at Zenrock’s request to act as an intermediary. From CAO’s perspective, it stood to earn a modest gross profit of US$62,254.32 by bridging this gap. As such, contrary to BCP’s assertions, CAO had not entered into a sham or fraudulent contract with Zenrock. Instead, unknown to CAO at the time of contracting with Zenrock, Zenrock had engineered a circular transaction in the following manner, which is Series B above:

  36. Zenrock → GBE → SEIS → CAO → Zenrock

  37. [27] However, in contrast to BCP’s position that only Series B took place, CAO argues that the Series B “circle” and the Series A “chain” co-existed. Thus, by CAO’s case, title to the Cargo passed through the circular Series B transactions before vesting back in Zenrock, to be passed down later to Petrolimex under Series A. This can be represented graphically as follows:

  38. [28] On the back of its position in relation to the Cargo, CAO’s defence against BCP’s pleaded causes of action comprise the following:

  39. The other parties’ cases on the Main Proceedings

  40. [29] While BCP technically has not sued SEIS and GBE in the 3PP and 4PP respectively, both SEIS and GBE have an interest in CAO prevailing in the Main Proceedings. This is because if CAO succeeds in the Main Proceedings, the 3PP and 4PP will become moot. As such, GBE made extensive submissions on the Main Proceedings, which were very helpful. However, rather than summarise GBE’s position on the Main Proceedings at this point, which largely mirrors CAO’s position, I will refer to its arguments at the relevant parts of this judgment. SEIS did not make any submissions on the Main Proceedings.

  41. The relevant issues

  42. [30] With BCP’s and CAO’s general cases in mind, I now set out the relevant issues that I will discuss below.

  43. [31] First, I will deal with a threshold issue of BCP Dubai’s standing, being the party that CAO alleges actually suffered loss, to even sue CAO in this case. This threshold issue arose during cross-examination, when it emerged that BCP Dubai had ceased operations as a branch but transitioned to become a representative office. CAO, SEIS, and GBE therefore raised the question of whether BCP Dubai even has standing to sue in the Main Proceedings. To this, BCP’s position is that BCP Dubai continued to exist as a legal entity despite having transitioned to become a representative office. For the reasons below, I find that BCP Dubai does not have standing to sue CAO in the Main Proceedings. Despite this being sufficient to dispose of the Main Proceedings, I will nonetheless go on to deal with the substantive issues.

  44. [32] Second, I will deal with the overarching factual question of whether the CAO-ZR Contract was a sham or fraudulent transaction. I do this because the resolution of this factual question affects most, if not all, of BCP’s causes of action against CAO, which are mainly premised on the CAO-ZR Contract being a sham or fraudulent transaction. As I will explain below, I find that the CAO-ZR Contract was not a sham or fraudulent transaction. While there is another overarching factual and legal question about the correct interpretation of Field 47A(10) of the LC, I will deal with that question under my discussion of whether CAO is liable for deceit. For completeness, I acknowledge that BCP has, in its closing submissions, attempted to frame its claims in fraud as being alternative to, or independent of, the finding that the CAO-ZR Contract was a sham or fraudulent transaction (eg, Plaintiffs’ Closing Submissions (“PCS”) para 88). However, I reject this and hold BCP to its pleadings, in which it pleaded its case in fraud as a “further” case rather than an alternative case.

  45. [33] Third, I will deal with the following substantive issues:

  46. I will explain below why I resolve these substantive issues in CAO’s favour. The primary reason, as may already be apparent, is that BCP had primarily pinned its success on these issues to it successfully showing that the CAO-ZR Contract was a sham or fraudulent transaction. It follows that BCP’s failure on the foregoing factual issue must necessarily cause it to fail on these substantive issues.

  47. A threshold issue: whether BCP Dubai has standing to sue CAO in the Main Proceedings

  48. The parties’ arguments

  49. [34] As a threshold issue, CAO points out that BCP’s pleaded case is that BCP Dubai is a branch of BCP. CAO has not admitted in its pleadings that BCP Dubai is a branch of BCP. Under cross-examination, both Mr Pierre Galtie (“Mr Galtie”), BCP’s Head of Commodity Trade Finance, and Mr Engin Oce (“Mr Oce”), the former First Vice President and Branch Manager of BCP Dubai, admitted that BCP Dubai is no longer a branch of BCP, having ceased operations as of June 2022 and having been converted into a representative office. Since BCP has not pleaded DIFC law to show that BCP Dubai’s conversion into a representative office had no effect on its legal status as a branch office, Singapore law must apply to decide this issue. By Singapore law, a representative office is not the equivalent of a branch office. Accordingly, BCP Dubai has not proved its legal capacity to sue.

  50. [35] In response, BCP makes the following arguments. First, CAO, in disputing the status of BCP Dubai, is putting forward a new positive case that it had not pleaded previously. Second, the documents proving BCP Dubai’s new status are inadmissible, and even if they are, they should be given no weight. Third, the change in BCP Dubai’s status is immaterial because BCP Dubai clearly continued to exist, and BCP Dubai and BCP Geneva “were one and the same legal entity”. In that regard, since BCP Dubai was not a separate legal entity, the loss was suffered by BCP as a single entity. BCP can claim for that loss because its rights under the LC were never transferred away or lost as a result of BCP Dubai’s change in status.

  51. My decision: BCP Dubai does not have the standing to sue CAO

  52. [36] I find that BCP Dubai does not have the standing to sue CAO. First, since none of the parties have pleaded DIFC law, Singapore law applies as a default rule (see the Appellate Division of the High Court decision of Ollech David v Horizon Capital Fund [2024] SGHC(A) 8 at [55]−[56]). At common law, branches of a bank are regarded as emanations of the bank such that the head office of a bank and its various branches are regarded as a single legal entity (see the High Court decision of Sinopec International (Singapore) Pte Ltd v Bank of Communications Co Ltd [2024] 3 SLR 476 at [49]). However, given that a plaintiff bears the burden of establishing its standing to sue, BCP has failed to discharge its burden of proving how, under Singapore law, BCP Dubai should be allowed to maintain an action as an emanation of BCP despite the fact that BCP Dubai is no longer a branch of BCP. In this vein, I also reject BCP’s arguments in so far as they attempt to reverse the burden of establishing BCP Dubai’s standing to sue. These unmeritorious submissions include, among others, arguments that CAO was not entitled to put forward a new positive case that BCP Dubai had closed and lacked standing, and that CAO had to prove the authenticity of the documents challenging BCP Dubai’s standing to sue.

  53. [37] For completeness, I do not agree with CAO’s argument that the effect of Art 3 of UCP 600, which is incorporated into the LC by Field 40E, is that in a letter of credit transaction, the branches of a bank are considered as separate banks from each other and the head office. CAO argues that while Art 3 of UCP 600 does not convert the branch of a bank into a separate legal entity, it affects the rights and obligations that arise from a letter of credit transaction. Thus, in such a transaction, branches of a bank are considered to be separate banks from each other and the head office. Each is entitled to substantive rights or subject to substantive obligations vis-à-vis each other and other parties in a letter of credit transaction. According to CAO, this means that BCP Geneva and BCP Dubai did in fact treat each other as separate banks. Indeed, BCP Geneva and BCP Dubai treated each other as different entities, warranting a back-to-back LC, rights of reimbursement, and separate booking of losses. However, in my view, the question of how commercial parties relate to each other in relation to a letter of credit transaction is conceptually different from the juridical status of a party to sue in a particular court. I therefore do not think that the effect of Art 3 of UCP 600 can be extended to cover issues of standing.

  54. [38] In any event, based on my first reason above, I find that the proper plaintiff under the LC should be BCP Geneva as the issuing bank. While BCP Dubai was the party who suffered the loss because it reimbursed BCP Geneva and its client, Zenrock, defaulted, I take the view that BCP Dubai lacks the legal capacity to sue CAO. The outcome is that BCP Geneva, as the only party who has legal capacity to sue, may not be able to show that it actually suffered loss that ought to be compensated.

  55. [39] In the end, however, BCP Dubai’s standing does not matter because, even if it had standing, I find, for the reasons explained below, that BCP’s various causes of action against CAO should all be dismissed.

  56. Whether the CAO-ZR Contract was a sham or fraudulent transaction

  57. The parties’ arguments

  58. [40] I turn to the parties’ arguments on whether the CAO-ZR Contract was a sham or fraudulent transaction. BCP’s contention that this was so rests on two independent points. First, CAO did not expect to make, and did not make, physical delivery of the Cargo to Zenrock as it (CAO) knew or ought to have known that there was no Cargo being delivered by SEIS to it. Second, and in any event, CAO failed to deliver good title in the Cargo to Zenrock. Accordingly, the CAO-ZR Contract was part of the series of sham or fraudulent transactions in Series B.

  59. [41] More specifically, BCP submits that CAO knew or ought to have known that there was no Cargo being delivered by SEIS to it for the following reasons:

  60. [42] In response, CAO submits that the CAO-ZR Contract was a genuine sale and purchase transaction and not a sham or fraudulent transaction. In so submitting, CAO makes the following points:

  61. [43] Finally, GBE argues that BCP has not shown that the CAO-ZR Contract, which was reduced into writing and thus created a very strong presumption that parties intended to be bound by its terms, was a sham or fraud. On the contrary, the evidence shows that real physical Cargo was sold, and that each supplier up the sale chain intended to and did in fact perform their respective contracts. To this, GBE makes the following points:

  62. GBE further elaborates on these points in the main body of their closing submissions.

  63. [44] With the parties’ arguments in mind, I turn first to the applicable law.

  64. The applicable law

  65. [45] It is not disputed among the parties that, for a contract to be a sham, there must be a common subjective intention that the transaction documents were not to create the legal rights and obligations which they give the appearance of creating (see the Singapore International Commercial Court (“SICC”) decision of Credit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another suit [2022] 4 SLR 1 (“CACIB (SICC)”) at [120], as well as the High Court decision of UniCredit Bank AG v Glencore Singapore Pte Ltd [2022] SGHC 263 (“UniCredit (HC)”) at [26]–[27]).

  66. [46] Whether there is such a common subjective intention is to be assessed by a holistic consideration of the parties’ conduct and other relevant evidence. Importantly, if an agreement is reduced to writing, this creates a strong presumption that the parties intended to enter into the legal relations that those documents purport to create. The onus of rebutting this presumption rests on the party alleging the sham (see the High Court decisions of Goodwood Associates Pte Ltd v Southernpec (Singapore) Shipping Pte Ltd and another suit [2020] SGHC 242 (“Goodwood”) at [114] and UniCredit (HC) at [64]).

  67. [47] Applied to the present case, BCP needs to show, based on the parties’ conduct, that both CAO and Zenrock had the common subjective intention that the CAO-ZR Contract would not create the legal rights and obligations that it appeared to do. Also, because the CAO-ZR Contract was reduced to writing, BCP bears the onus of rebutting the strong presumption that CAO and Zenrock intended to enter into the legal relations that the said Contract appears to create. For the reasons that I will now discuss, I find that the CAO-ZR Contract was not a sham or fraudulent transaction.

  68. My decision: the CAO-ZR Contract was not a sham or fraudulent transaction

  69. [48] In my judgment, the CAO-ZR Contract was not a sham or fraudulent transaction.

  70. [49] First, the evidence shows that CAO clearly intended to enter into genuine contracts, including the CAO-ZR Contract. The relevant evidence includes: (a) CAO’s risk management measures; (b) the conduct of CAO’s personnel in relation to (especially) the CAO-ZR Contract; and (c) CAO’s appointment of Inspectorate.

  71. [50] Second, the fact that the CAO-ZR Contract is part of a circular trade does not mean that it is ipso facto a sham or fraudulent transaction. This is because a number of Singapore cases have recognised the legitimacy of circular trades, and I am persuaded that there are legitimate commercial reasons for circular trades.

  72. [51] Third, I do not find that BCP’s expert evidence, elicited from Mr Goh, disproved CAO’s intention to enter into genuine contracts. In particular, I do not find Mr Goh’s identification of alleged operational lapses (if they were indeed lapses) showed that the CAO-ZR Contract was a sham or fraudulent transaction. In contrast, I prefer Mr Slovenski’s view that, when taken in the round, these alleged operational lapses, even if established, cannot prove that the CAO-ZR Contract was a sham or fraudulent transaction.

  73. [52] Fourth, in as much as BCP relies on the IJM Reports to prove its case, I find that the IJM Reports are inadmissible as evidence and that, even if they were admissible, they do not advance BCP’s case.

  74. [53] Fifth, and taking a step back, I find that the CAO-ZR Contract had taken place against the broader Series A transactions. The implication of this finding is that there was real physical Cargo involved in the Series A and Series B transactions, including the CAO-ZR Contract. This also means that even though the CAO-ZR Contract had been part of the circular Series B transactions, that by itself does not show that it was a sham or fraudulent transaction.

  75. [54] I will now explain these points in greater detail.

  76. The evidence shows that CAO intended to enter into genuine contracts

  77. (1) CAO’s risk management measures

  78. [55] To begin with, the division of responsibilities between CAO’s Front Office (ie, the Trading Department), Middle Office (ie, the Operations and Risk Management Departments), and Back Office (ie, the Finance Department and Administration) shows that the CAO-ZR Contract was not a sham or fraudulent transaction. This is for the following reasons.

  79. [56] First, the suite of risk management measures at CAO would have made it difficult for a sham or fraudulent transaction to be successfully pulled off at CAO. In this regard, apart from the division of responsibilities between CAO’s various offices, CAO also utilised an internal risk management system which mitigates the risk of the company engaging in an illicit transaction, by requiring that transaction details are entered into and checked against CAO’s internal transaction system, CXL. Thus, each department in CAO carried out inter-departmental checks to ensure that the documentation is consistent with the information which is keyed into CXL. On the facts of the present case, Mr Lang Yansong (“Mr Lang”), who was the Trading Manager involved in the CAO-ZR Contract, copied his colleagues from the Trading Department, Middle Office, and Back Office at the “DealAlert” group email address. This ensured that the other departments were aware of the deal, specifically, the CAO-ZR Contract.

  80. [57] All of these measures made it unlikely for an individual trader, such as Mr Lang in this case, to be able to take part in a sham or fraudulent transaction without anyone else at CAO being put on alert. In this regard, I accept Mr Slovenski’s evidence that it is important for any trading company to have various processes to manage risk and ensure that the employees’ activities are within the company’s mandate. This ensures that there is visibility or cross-checks across different departments. This in turns mitigates the risk of fraud or illicit trading.

  81. [58] Second, even if an individual at CAO tried to perpetuate the CAO-ZR Contract as a sham or fraudulent transaction, BCP has not pleaded the identity of the specific human actor in CAO whose allegedly fraudulent state of mind should be attributed to CAO. This is an important point because it is necessary to pinpoint some human actor with the requisite state of mind for attribution to the company (see the High Court decision of Antariksa Logistics Pte Ltd and others v Nurdian Cuaca and others [2018] 3 SLR 117 at [146]). Therefore, in so far as BCP has not identified anyone at CAO with the requisite state of mind, it is not possible to find that CAO had entered into a sham or fraudulent transaction with Zenrock. For completeness, I reject BCP’s argument as to why it need not have pleaded the identity of a specific human actor, which is that as long as CAO’s employees were acting within the scope of their employment, then vicarious liability allows their fraud to be attributed to the company. This argument is incorrect because the doctrine of vicarious liability concerns the imposition of liability and not the attribution of intention. Thus, the Court of Appeal held in Ng Huat Seng and another v Munib Mohammad Madni and another [2017] 2 SLR 1074 (at [41]) that, under vicarious liability, “the law holds a defendant liable for the negligence of another even if the defendant has not been negligent at all”.

  82. [59] Accordingly, I find that CAO’s risk management measures make it unlikely that anyone at CAO could have entered into a sham or fraudulent transaction without the rest of the company being alerted to it. More specifically, I find that it is unlikely, had it been specifically pleaded, that Mr Lang or Ms Chng had been engaged in a sham or fraudulent transaction with Zenrock through the CAO-ZR Contract.

  83. (2) The conduct of CAO’s personnel

  84. [60] In any case, CAO’s personnel, including Mr Lang and Ms Chng, had followed its processes pursuant to its internal risk management measures in the CAO-ZR Contract. Mr Lang, as the Trading Manager who concluded both CAO’s deal recaps (ie, a summary of the main terms of the proposed deal) with SEIS and Zenrock, had conducted due diligence prior to commencing negotiations with these parties to ensure that he was dealing with approved counterparties. He then considered the operational and contractual risks of dealing with those counterparties, concluded the deal recaps with the counterparty trader over email, entered the deals into CXL (CAO’s internal risk management system), and communicated with his colleagues in a manner that wholly suggested that he treated the transactions as genuine. Indeed, when Mr Lang was cross-examined by Mr Shem Khoo (“Mr Khoo”), who appeared on behalf of BCP, he consistently confirmed that CAO took on the rights and obligations as both buyer and seller in the deals with SEIS and Zenrock respectively.

  85. [61] Similarly, Ms Chng’s conduct also showed that she believed that the CAO-SEIS Contract and the CAO-ZR Contract created the legal rights and obligations they gave the appearance of creating. Indeed, Ms Chng did not do anything out of the ordinary: she (a) drafted and issued the CAO-ZR Contract; (b) negotiated the CAO-SEIS Contract; (c) negotiated the terms and issuance of the LC in conjunction with the Finance Department; and (d) carried out operational tasks such as vessel nomination, appointing and receiving updates from Inspectorate, checking documents that SEIS presented for payment, and checking the documents that CAO was to present for payment under the CAO-ZR Contract.

  86. [62] Accordingly, I find that both Mr Lang’s and Ms Chng’s conduct in relation to the sale contracts, especially the CAO-ZR Contract, indicate that they treated the transactions as genuine. This suggests that CAO intended to enter into genuine transactions. In this regard, I recognise that BCP alleges that Mr Lang and Ms Chng ought to have done more, such as conducting further checks as to the title of the Cargo further upstream. While I will address these concerns later in this judgment, I do not think that these allegations show that Mr Lang and Ms Chng had engaged in a sham or fraudulent transaction. At best, these issues point to some operational lapses. But, as Mr Goh acknowledged, there is a clear distinction between a party who enters into a trade imprudently or carelessly against a party who enters into a transaction that it did not intend to perform.

  87. (3) CAO’s appointment of Inspectorate

  88. [63] Further, CAO’s appointment of Inspectorate, which, as Mr Slovenski explained, is one of a number of cargo surveyors with an international presence who are trusted across the industry, shows that it intended to enter into genuine contracts. Indeed, both Mr Goh and Mr Slovenski agreed at Agreed Item 4 of their Joint Expert Statement dated 30 June 2023 (“Joint Expert Statement”) that “[m]arket participants in oil transactions rely on independent inspectors to ensure that the quantity and quality are as per the contract, and to act as a witness to the loading and/or discharge of the cargo”. Accordingly, even if Mr Lang had agreed to enter into a sham or fraudulent transaction, as Mr Wong, CAO’s Head of Operations, explained, Inspectorate would have independently notified CAO’s Middle Office that no cargo was being loaded for the transaction. Indeed, Inspectorate would also have alerted CAO to any fraudulent transactions that may have been attempted through forgery or double financing.

  89. [64] As such, as GBE rightly submits, if CAO was involved in a sham or fraudulent contract and wanted to avoid others from detecting that there was no physical cargo, it would not have appointed an independent cargo surveyor who would have exposed any fraud. It must follow that CAO’s appointment of Inspectorate shows that it intended to enter into genuine contracts.

  90. [65] In this regard, while Mr Khoo had suggested that Inspectorate knew that the CAO-ZR Contract was a sham, he subsequently retracted that statement and confirmed that BCP is not alleging that Inspectorate was a party to any fraud. Similarly, while Mr Goh suggested at Agreed Item 4 of the Joint Expert Statement that Inspectorate may not have acted independently, he later conceded under cross-examination that he had no evidence to show that Inspectorate was not independent or had issued false reports to CAO.

  91. [66] Having retreated from the position that Inspectorate itself was a party to any alleged fraud, BCP makes various arguments in its closing submissions as to why CAO’s appointment of Inspectorate was not bona fides or genuine: (a) the appointment of Inspectorate was not “mutually agreed” between CAO and SEIS; (b) Inspectorate failed to invoice, or seek payment from, any of the Series B parties; and (c) CAO failed to question Inspectorate’s non-compliance with its instruction that the consignee on the bill of lading was to be CAO (instead of Natixis). I find all these points to be without merit. To begin with, (a) is not true. Ms Chng had proposed the appointment of Inspectorate to SEIS in an email dated 22 January 2020 and the latter executed the transaction without raising any objection. This constitutes mutual agreement. As for (b), to the extent that BCP is attempting to argue that Inspectorate was complicit in a bad faith appointment, I reiterate the points at [65] above. This leaves (c), which is insufficient to prove that CAO’s appointment of Inspectorate was not genuine. As such, I do not consider that BCP has successfully challenged CAO’s evidence in relation to the appointment of Inspectorate and its implications.

  92. [67] Accordingly, in my judgment, CAO’s risk management measures, CAO’s personnel’s conduct in relation to (especially) the CAO-ZR Contract, and CAO’s appointment of Inspectorate, all support a finding that CAO intended to enter into genuine sale contracts. This means, and I so find, that CAO did not enter into the CAO-ZR Contract without a genuine intention to perform the obligations within. In other words, the CAO-ZR Contract is not a sham or fraudulent transaction. While this is sufficient to dispose of the point, I go on to explain why I do not regard BCP’s counterevidence to be convincing in refuting this finding.

  93. The fact that the CAO-ZR Contract was part of a circular trade does not mean it is ipso facto a sham or fraudulent transaction

  94. [68] In so far as BCP makes this point, I turn first to consider whether the CAO-ZR Contract, being part of a circular trade, is ipso facto a sham or fraudulent transaction. In my judgment, the mere fact that the CAO-ZR Contract is part of a circular trade does not lead automatically to such a conclusion.

  95. [69] As a matter of precedent, there are a number of Singapore cases which have recognised the legitimacy of circular trades. One, Hoo Sheau Peng J in Goodwood (at [44]) had acknowledged that circular trades are not ipso facto shams. The learned judge drew a further distinction between circular trades in which no delivery of goods was contemplated, against those in which no trading was contemplated at all. In her view, which I respectfully agree with, only the latter, where no trading was contemplated at all, constitutes a sham (see Goodwood at [47]–[48]). Two, Andre Maniam J in UniCredit (HC) found that the contract of sale between Hin Leong and Glencore (Hin Leong  Glencore  Hin Leong) was not a sham (at [34] and [39]). This was because the obligations of title transfer and payment were performed. Although the contract was part of a circular trade, this fact did not change the analysis above. Finally, the Court of Appeal in Crédit Agricole Corporate & Investment Bank, Singapore Branch v PPT Energy Trading Co Ltd and another appeal [2023] SGCA(I) 7 (“CACIB (CA)”) likewise acknowledged the legitimacy of circular trades in the following terms (at [12]):

  96. [70] As a matter of principle, evidence was led on the legitimate commercial reasons for circular trades. For example, as Mr Wong explained, “in trading society, because of the time difference, you can trade today with this guy, and then probably a few more days later, you can buy it back. It’s quite common in the industry”. Indeed, as Hoo J explained in Goodwood (at [48]), there is nothing uncommercial in parties seeking to make arbitrage profits or brokerage fees in circular trades. Another example of a legitimate reason for circular trades, as SEIS’s Director, Mr Jiang Letian, suggested during cross-examination, is to obtain liquidity of funds while trading. This is likely what happened in the present case:

  97. In effect, the arrangement under Series A and Series B allowed Zenrock to secure funds from GBE within 10 days of its sale of the Cargo, while it was only required to pay CAO some 35 days after receiving the same from GBE. In other words, the circular trade provided Zenrock with liquidity of funds in the interim period (roughly 35 days) before it had to eventually pay CAO for the Cargo.

  98. [71] I will return to discuss how the CAO-ZR Contract is situated within the Series A and Series B transactions. But for now, it suffices for me to conclude that the mere fact that the CAO-ZR Contract was part of a circular trade does not, without more, render it a sham or fraudulent transaction.

  99. BCP’s expert evidence does not disprove CAO’s intention to enter into genuine contracts

  100. (1) Mr Slovenski’s evidence is generally preferable to that of Mr Goh’s

  101. [72] I turn next to BCP’s expert evidence from Mr Goh. To begin with, I generally prefer Mr Slovenski’s evidence to that of Mr Goh’s for the following reasons.

  102. [73] First, and with respect to Mr Goh, I find that he made a number of unsubstantiated and speculative remarks without foundation that cast doubt on his independence as an expert witness. One, as I mentioned above, Mr Goh speculated that Inspectorate was not truly independent without any evidence to substantiate this. Two, Mr Goh suggested, without any evidence, that CAO’s CXL system could be gamed by an individual such as the managing director or “trading boss” of the department. Three, Mr Goh conceded under cross-examination that he had been entirely speculative in suggesting that SEIS would not have been able to buy a cargo from Petco, when he was unfamiliar with and did not make any enquiries of Petco’s requirements when approving trading counterparties. These non-exhaustive examples of Mr Goh’s propensity to make unsubstantiated and speculative remarks cast doubt on his independence as he appeared to have attempted to be an advocate of BCP’s cause (see the Court of Appeal decision of Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal [2008] 2 SLR(R) 491 at [70], citing the High Court decision of Vita Health Laboratories Pte Ltd and others v Pang Seng Meng [2004] 4 SLR(R) 162 at [82]–[83]). In contrast, I find that Mr Slovenski was measured on the stand, tendered considered views based on firm foundations, and willingly retreated from his opinion when confronted with countervailing points that he accepted.

  103. [74] Second, I have concerns about the manner in which Mr Goh prepared his expert report. During cross-examination by Mr Toh Kian Sing SC (“Mr Toh”), who appeared on behalf of CAO, Mr Goh effectively admitted that he had not prepared the report fully by himself. More specifically, Mr Goh said that his report was based on a template prepared for an earlier case in which he had acted as an expert witness. Furthermore, Mr Goh admitted that Valere Capital, which had engaged him as an independent consultant, assisted with the drafting of his report by polishing up the report, toning down his views where appropriate, and making adjustments to his language. For example, Mr Goh was not able to explain the meaning of the expression “unencumbered title” at para 132 of his report because Valere Capital had inserted that phrase as part of its “additional polishing up”. Indeed, Mr Goh’s report does not comply with the requirements under O 40A of the Rules of Court (2014 Rev Ed) (“ROC 2014”) by not, for example, containing a statement accepting responsibility for its contents. In contrast, there was certainly no suggestion that Mr Slovenski had not prepared his report by himself.

  104. [75] Third, and again with respect to Mr Goh, I find that there are gaps in his experience which call into doubt his suitability to comment on the relevant issues in the present case. One, Mr Goh candidly recognised under cross-examination that he had no experience in concluding prompt deals. This is important. After all, he had opined that because the CAO-ZR Contract was a prompt deal, CAO had to take additional due diligence steps. But if Mr Goh does not have the relevant experience, then it is difficult to see how he could have advanced such an opinion convincingly. Two, Mr Goh also conceded that he had never concluded any “pre-structured deals” arranged by a third party, in which his company acted as an intermediary. This again undermines Mr Goh’s opinion on the issues in the present case, which are premised on such “pre-structured deals”. In contrast, Mr Slovenski was not alleged to lack experience as a trader in pre-structured and prompt deals.

  105. [76] Accordingly, for these reasons, I generally prefer Mr Slovenski’s evidence to that of Mr Goh’s. This, however, does not mean that I will disregard Mr Goh’s evidence entirely.

  106. (2) Mr Goh’s evidence of supposed operational lapses does not disprove CAO’s intention to enter into genuine contracts

  107. [77] In any event, even if I were to regard Mr Goh’s evidence as entirely reliable, I do not think that his evidence controverted CAO’s intention to enter into genuine contracts, nor suggested that the CAO-ZR Contract was a sham or fraudulent transaction.

  108. [78] In seeking to show CAO’s fraudulent intention, Mr Goh raised a long list of supposed shortcomings or “red flags” regarding CAO’s conduct when it was executing the CAO-ZR Contract. For convenience, I find it helpful to assess Mr Goh’s concerns by reference to five broad categories, namely: (a) the absence of shipping documents; (b) the absence of correspondence in relation to the performing vessel despite prompt loading; (c) the absence of correspondence about the upstream supplier and end buyer; (d) the last-minute change in nomination of the performing vessel; and (e) the absence of certain operational documents and correspondence. Properly assessed, I find that these various supposed operational lapses referred to by Mr Goh, even if true, are not indicators of a sham or fraudulent transaction. Indeed, in so far as Mr Goh’s evidence suggested this, I cannot accept that a genuine transaction must, among other things, be one that is carried out without any operational lapses whatsoever. Instead, I agree with CAO that falling short of operational perfection, especially in the fast-moving environment in which a trader or operator works, cannot be taken as an indication of a sham or fraud.

  109. (A) The specific context in which the deals were transacted

  110. [79] I start with the specific context in which the deals concerned were transacted.

  111. [80] First, it is important to bear in mind that these deals were prompt deals that Zenrock – which was at the time a well-known and reputable oil trading company in Singapore – had pre-structured on a back-to-back FOB basis. Thus, as Mr Alexandre de Kalbermatten (“Mr Kalbermatten”), BCP’s Head of Legal and Compliance, conceded, on its face, the mere speed of the transaction cannot be an indication that the parties knew or intended that there would be no cargo to be transacted. Indeed, as Mr Galtie stated, it is not unusual for oil shipments to be sold promptly, and “in some cases” for requests for letters of credit to be made a couple of days before loading. This explains why BCP agreed to issue the LC in the first place on 20 January 2020, even though the supplier of the Cargo (and the beneficiary of the LC) was only confirmed to be CAO that same day, with the anticipated loading window for the shipment starting just four days later, from 24 to 26 January 2020.

  112. [81] In this regard, Mr Goh opined in his report that “traders will normally buy and sell petroleum products (such as gasoil) at least 14 to 30 days ahead of the first day of the five-day loading date range (for free on board (‘FOB’) trades)”. In contrast, Mr Slovenski opined that there are no such strict timelines for trading. In his view, “trade depends on whenever somebody has a cargo or what have you”. Between these two views, I prefer Mr Slovenski’s view because Mr Goh’s view actually contradicts BCP’s own experience in relation to prompt deals. Accordingly, I do not think that the mere speed of a transaction is an indicium of it being a sham or fraudulent. Indeed, Mr Goh himself does not deny that, in the context of a prompt deal, parties have to work within compressed timelines. From this context, it is perfectly understandable why operational lapses may occur. But these lapses, when they occur, cannot be taken as indicative of the transaction concerned being a sham or fraudulent.

  113. [82] Second, it is also important to bear in mind the overall context of the CAO-ZR Contract. By CAO’s own calculations, it stood to earn a modest profit of US$62,254.32 by standing as an intermediary between SEIS and Zenrock by taking a 35-day credit risk. Indeed, by Mr Goh’s calculations, CAO would only earn a small profit of US$7,781.79. It is therefore unreasonable to think that CAO would risk its reputation, being a company listed on the Singapore Exchange, by participating in a sham or fraudulent transaction that involved it corresponding with various third parties, including an independent surveyor, whose role is to check against such practices. I therefore accept Mr Lang’s evidence that he would not have put CAO’s reputation at risk over such a modest profit. While Mr Goh had initially suggested that CAO’s small profit does not make sense for a bona fide arm’s length transaction involving real cargo, he ultimately conceded that he did not honestly believe that CAO would orchestrate a fraud and create a paper trail to cover up the same, merely to earn a small profit of around US$7,000 (by his calculation). This is an important concession in favour of CAO’s case.

  114. [83] Having dealt with these two points arising from the specific context in which the deals were transacted, I turn to assess Mr Goh’s concerns about what were really operational lapses (if at all) by CAO in the CAO-ZR Contract.

  115. (B) The absence of shipping documents

  116. [84] To start, Mr Goh opined that the industry practice was for SEIS to send CAO the OBLs and original shipping documents 30 to 90 days after the bill of lading date. Mr Goh also points out that CAO should have given the OBLs and original shipping documents to Zenrock within a reasonable period after receiving payment. As to the length of a reasonable period, Mr Goh vacillates between the “30 to 90 days after the [bill of lading] date” to “between 15 and 45 days after BL date” and then back again to “between 30 and 45 days” at various points in his report. In any case, Mr Goh then opined that since the OBLs and shipping documents have not been found for more than three years since 2020, they likely never existed in relation to the Series B transactions. Mr Goh advanced this view despite agreeing that CAO was acting entirely in line with industry practice by presenting an LOI for payment without making enquiries about the whereabouts of the OBLs. In any case, BCP relies on Mr Goh’s opinion in submitting that the fact that CAO did not take any steps to check whether information or documents were being passed from Zenrock to SEIS leads to the inference that it knew all along that Series B transactions did not involve real Cargo.

  117. [85] I do not accept Mr Goh’s opinion and, by extension, BCP’s submission. First, leaving aside the apparent inconsistency in his view as to what constitutes a reasonable period, Mr Goh has not provided any basis for the alleged market practice to chase for original documents within such a period of time after loading. When Mr Toh asked Mr Goh to substantiate his opinion during cross-examination, Mr Goh merely alleged that this was based on “internal requirements” of major oil companies (also termed “oil majors”). However, given that Mr Goh has never worked in an oil major, it is unclear to me how Mr Goh can claim the expertise to make this assertion. In contrast, I prefer Mr Slovenski’s evidence in this regard, which is that “[i]t is not industry practice to check with an FOB seller or its seller(s) where the original bills of lading are or to chase for the BLs, especially if the trader is in the middle of a chain and its downstream buyer is not chasing for the original shipping documents”.

  118. [86] Second, Mr Goh eventually conceded under cross-examination that if CAO was not chased by Zenrock, it would not have been expected to chase SEIS for the original documents. Indeed, this is consistent with BCP’s own conduct in relation to the first letter of credit that it had issued on Zenrock’s earlier purchase of a cargo of Iman crude oil from Gunvor Singapore Pte Ltd. Mr Galtie testified that BCP Geneva never received the OBLs for that transaction. Indeed, Mr Goh conceded that he did not know if any parties in the Series A transactions had chased for the OBLs in accordance with his supposed timelines as derived from market practice.

  119. [87] Accordingly, there is no evidence to suggest that OBLs and original shipping documents are surrendered within a reasonable period of time, or even sought or surrendered at all. As such, I find that the fact that neither CAO nor any of the other parties in the Series B transactions chased for the OBLs cannot be an indicium of a sham or fraudulent transaction.

  120. (C) The absence of correspondence in relation to the performing vessel despite prompt loading

  121. [88] Mr Goh opined that as the CAO-ZR Contract involved the prompt loading of cargo, a bona fide trader would have, before agreeing to the deal, requested or asked for the name of the performing vessel. He further elaborated that traders would try to fix a performing vessel two to three weeks in advance of the loading. As such, Mr Goh asserted that the fact that CAO made no such inquiries was “very out of the norm” and implied that CAO therefore did not truly believe that there was a genuine contract. BCP therefore submits that this shows that CAO never intended to deliver a physical cargo, and that CAO has not explained this inference away.

  122. [89] Again, I do not accept Mr Goh’s opinion and, by extension, BCP’s submission. First, it is not possible for there to be rigid timelines in a fast-paced and dynamic environment, where traders have to deal with multiple issues, including vessel availability, in a short time. Indeed, Mr Goh accepted that parties would work on much more compressed timelines in trades involving spot prompt cargoes. Given this fact, I accept CAO’s submission that how far in advance a deal or charter is concluded before the first loading date cannot be indicative of a sham. This is merely reflective of the real-world market conditions and demand, as well as cargo and vessel availability. In any event, the fixture recap for “Petrolimex 18”, ie, a summary of the essential terms on which “Petrolimex 18” was hired, in relation to what BCP asserts to be the legitimate Series A transactions, was dated 16 January 2020, being only seven days before the first loading date. This exceeds Mr Goh’s asserted timeline of two to three weeks and therefore refutes his suggestion.

  123. [90] Second, the mere fact that a trader did not make inquiries about the performing vessel cannot be taken to be indicative of a sham or fraudulent transaction. This is because a trader would be focused on a multitude of other concerns when negotiating a deal, such as, among other things: (a) reward in the deal; (b) risk taken on for the reward; and (c) operating within the mandates of the organisation. In other words, the trader would not be immediately concerned about vessel-related matters, which can be left to the operator to be dealt with in due course. In my view, Mr Slovenski’s opinion in this regard is practical, realistic, and reflective of the separation of functions between CAO’s various offices. As Mr Slovenski explained, once a trader has concluded a deal, the trader would hand over the transaction to be dealt with by the operations team. The operations team would then be concerned with ensuring the performance of the contract, including the nomination of vessels.

  124. [91] Third, with these points in mind, there is nothing in CAO’s conduct, in relation to the performing vessel, which leads to an inference that CAO did not intend to enter into a genuine transaction. To begin with, Zenrock’s Operations Executive, Mr Zhang Taiming, had nominated the “Petrolimex 08” and sent the vessel’s questionnaire 88 (“Q88”) Form to CAO via email on 21 January 2020 at 4.03pm. This was less than four hours after the transaction between Zenrock and CAO was confirmed via email on 21 January 2020 at 12.29pm. Thus, there were still three days before the start of the laycan period on 24 January 2020 (the “laycan” referring to the period within which a vessel is expected to arrive, with late arrival potentially rendering the buyer liable for damages). At that point on 21 January 2020, Ms Chng considered that it was still early, and that the load port terminal would chase for the vessel nomination of their own accord by passing a message down the sale chain, if it saw the necessity in doing so. There was therefore no urgency that would have caused CAO or any of the parties in Series B to be alarmed even though loading was meant to be prompt. Ultimately, as an intermediary in the sale chain, CAO would not be involved in the securing of the charter, which would have been the end-buyer’s responsibility. Thus, CAO would reasonably have been entitled to believe that Zenrock, which was subject to an express contractual obligation to nominate a vessel, would so perform. This is consistent with the duty imposed on an FOB buyer to “provide a vessel at the appointed time and place to enable the seller to bring the goods alongside for loading so as to enable the buyer to receive them within the appointed time” (see the High Court decision of Soon Hua Seng Co Ltd and others v Bombay Trading Co (Pte) Ltd [1990] 1 SLR(R) 390 at [14]).

  125. [92] Fourth, cl 6 of the CAO-ZR Contract gives CAO broad latitude in relation to the loading dates. This clause provides that the loading range of 24 to 26 January 2020 was “given for the sole purpose of calculating laytime and demurrage, and shall not be construed as guaranteed arrival or loading dates at the loadport. It is expressly acknowledged and agreed that the shipment period set out in [the] clause above shall not be of the essence, and that these shall be indicative only, made by the seller as an honest assessment without guarantee”. It is clear that cl 6 would have allowed the loading dates to be pushed back if a performing vessel could not arrive or be ready in time. Further, there is nothing in the Petronas Trading Corporation Sdn Bhd General Terms and Conditions for Spot FOB, CFR and CIF Sale of Products (February 2002 Revision) (“Petco GTCs”) that specified the date on which the vessel nomination must be made. Indeed, cl 2.4 of Part II of the Petco GTCs relating to vessel nominations, entitled “FOB Provisions”, provides that even if a buyer provides documentation instructions and appoints a joint surveyor less than 48 hours prior to the first day of loading date, the seller shall simply “treat the vessel on best endeavour basis”. Clause 2.6 also allows for substitution of a vessel with prior notice at any time before the first day of the delivery date range.

  126. [93] Accordingly, considering all of the above, there was no real urgency in relation to the vessel nomination at the time the CAO-ZR Contract was concluded. There was no alarm among the traders at the time, nor was there any reason for them to be alarmed. In no way does the absence of vessel nomination indicate that CAO lacked an intention to enter into a genuine transaction.

  127. (D) The absence of correspondence about the upstream supplier and end buyer

  128. [94] In Mr Goh’s view, CAO should have “insisted that [SEIS] reveal the identity of its upstream supplier/seller” and “confirmed with Zenrock that Petrolimex was at the end of the gasoil chain in Series B”. Mr Goh further opined that CAO’s failure to do so suggested that “all parties involved in Series B (including CAO) knew that the transactions involved a fictitious cargo”. It became clear during Mr Khoo’s cross-examination of the various witnesses that BCP’s position is that CAO’s failure to conduct such checks demonstrated its disregard of the truth of the statements made in CAO’s LOI that it “had immediately before title passed to [Zenrock] good title to such product” and that “title in the product has been passed as provided in the agreement to [Zenrock] free from all liens, securities, charges or encumbrances of whatever kind”.

  129. [95] Again, I do not accept Mr Goh’s opinion and, by extension, BCP’s submission, for a few reasons. First, I accept Mr Slovenski’s opinion that it is practically difficult, if not impossible, for a purchaser to check title to a shipment of title. This is because there is no central registry for such checks to be made. Thus, to adhere to Mr Goh’s suggestion that it should have confirmed the identity of the upstream seller or supplier, CAO would have to check, not only who supplied the Cargo to SEIS, but also the legitimacy of the entire chain all the way up to Petco, which was the original supplier of the Cargo. It is not clear that CAO could have done this without practical difficulties, if at all.

  130. [96] Second, the practical difficulties with verifying the legitimacy of the entire chain explain why the evidence, from the various witnesses at trial, was that it would be highly unusual to expect CAO to have conducted these checks. In particular, apart from the practical difficulties, the fact is that information about a trader’s trading counterparties is considered trading secrets. Thus, as Mr Slovenski explained, the commercial reality is that few would ask who a trader’s supplier was. Indeed, the trader may not be amendable to disclosing this information given that it is, in Mr Slovenski’s words, “private information” possibly amounting to some “sort of intellectual property”, and a trader who reveals his source risks being cut out of future deals. In contrast, I regard as commercially unsound Mr Goh’s opinion that a trader should have no concerns about being displaced.

  131. [97] Third, there was simply no point in CAO checking whether SEIS had title to the Cargo at the time they entered into an agreement. This is because, in a back-to-back FOB trade in which title passes upon delivery, a supplier would only get title to the Cargo when the cargo was delivered to it. It is only at that point in time (ie, upon delivery) that the supplier would have title of its own to pass down to the next purchaser. As such, in the present case, SEIS would only receive title to the Cargo, which it could then pass down to CAO, when the Cargo was delivered to SEIS. This is why it would have been pointless for CAO to have checked if SEIS had title to the Cargo at the time when both parties reached an agreement. What CAO instead needed to do, which they did, was to take steps to ensure that loading was done in accordance with the terms of the FOB contract. If loading and delivery were done properly, then title in the Cargo would be naturally transferred to CAO.

  132. [98] In this regard, there are two facts which showed that CAO legitimately thought that there was an actual physical shipment, and that there was thus no need to check with SEIS as to the existence of the Cargo. One, CAO had engaged Inspectorate to monitor the loading of the Cargo. Thus, upon receipt of Inspectorate’s reports, CAO was entitled to, as Mr Goh agreed with Mr Toh, “legitimately believe that there was an actual physical shipment”. Two, CAO was dealing with its trusted trading partners who were on its approved counter-party list. It is true, as Mr Khoo highlighted during his cross-examination of Mr Lang, that there was an assessment overdue alert on SEIS’s status as an approved counter-party, as well as an ambiguous requirement of “No purchase (unless PCG from Shandong Energy Group / an entity acceptable to CAOSG can be obtained)” in CAO’s approved counter-party list. However, I accept Mr Lang’s evidence that this merely restricted CAO from selling to SEIS but did not prevent CAO from purchasing from SEIS. Further, even if Mr Lang misunderstood this ambiguous requirement and breached CAO’s internal trading conditions, that did not mean that the transaction with SEIS was not a real transaction. As Mr Slovenski correctly pointed out, the breach of an internal mandate, while important, does not necessarily indicate that the contract entered into is not a real contract.

  133. [100] Accordingly, considering all of the above, I find that CAO acted in line with the commercial realities of gasoil trading practice despite it not making any checks on the ultimate supplier. In addition, there were no exceptional factors that ought to have prompted CAO to perform such checks. Therefore, the fact that CAO did not verify the identities of the upstream seller and end buyer is not an indicator that the CAO-ZR Contract (and the CAO-SEIS Contract) was a sham or fraudulent transaction.

  134. (E) The last-minute change in nomination of the performing vessel

  135. [101] Mr Goh expressed concerns about the last-minute change in the nomination of the performing vessel from the “Petrolimex 08” to the “Petrolimex 18”. He opined that it was out of the norm for there to be a mistake in vessel nomination for prompt transactions, since there must be a good reason for substitution and the process of clearing a vessel takes time. BCP therefore submits that this is an indicium of the CAO-ZR Contract being a sham or fraudulent transaction.

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