Glencore has successfully fended off a claim by UniCredit to recover $37m linked to a transaction with liquidated Singapore oil trader Hin Leong.
Singapore High Court judge Andre Maniam has ruled that the commodities trader did not “defraud or deceive” the Italian lender, nor did it conspire with Hin Leong to injure UniCredit, nor was it unjustly enriched.
On 27 November 2019, Hin Leong applied to UniCredit for an irrevocable letter of credit in the sum of $37.2m to finance the purchase of 150,000 tonnes of high-sulphur fuel oil from Glencore.
The sale contract stated that the goods would be shipped on board the 157,000-dwt New Vision (built 2018) and delivered to Singapore in the period of 18 to 25 December 2019.
However, Glencore agreed to simultaneously buy back the goods from Hin Leong.
The parties agreed that on 2 December 2019, title to the goods would pass from Glencore to Hin Leong, and immediately back to Glencore.
Hin Leong subsequently submitted a revised letter of credit to UniCredit, which asked the Singapore company for documents including the purchase and sales contracts or a deal recap.
According to the ruling, Hin Leong replied the same day that its letter of credit application was for “unsold cargo” and was providing a copy of the sales contract.
In fact, the goods were not unsold cargo, as Hin Leong had already contracted to sell the goods back to Glencore, according to the judge’s decision.
On 2 December 2019, Glencore asked UniCredit for payment under the letter of credit, but failed to mention that it had brought back the cargo, Judge Maniam wrote.
Hin Leong was placed under judicial management on 7 August 2020 and subsequently went into liquidation on in March of last year.
UniCredit therefore found itself without repayment from Hin Leong, without the goods, without the original bills of lading and without security over the goods or the bills of lading.
Manian ruled that UniCredit had not proven that Glencore and Hin Leong shared a common intention that the purported rights and obligations under the sale contract were “not to be real rights and obligations”.
“On the contrary, it appears that the rights and obligations under the sale contract were real, and indeed the obligations of title transfer and payment were performed,” the judge said.
“Glencore transferred title to the goods to Hin Leong, and Hin Leong paid for the goods by getting UniCredit to issue an LC [letter of credit] pursuant to which UniCredit paid Glencore.”
