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China Merchants Bank legal suit with Sinfeng over alleged $13 million debt progresses

11 Oct 2019

China Merchants Bank Co Ltd (CMB) is currently engaged in a legal suit against Sinfeng Marine Services Pte Ltd, the indirect wholly-owned bunkering subsidiary of Hong Kong-listed Cosco Shipping International (Hong Kong) Co., Ltd, at the High Court of the Republic of Singapore over total debt of USD 12.5 million (exact: USD 12,464,691.05).

The case involves Singapore-based Coastal Oil Pte Ltd, which is a supplier of oil products to Sinfeng.

Justice Tan Siong Thye on Friday (4 October) granted a ‘pre-action discovery’ decision in favour of CMB; the decision allows the bank to obtain relevant case documents from Sinfeng in support of its debt recovery.

The document written by Justice Tan, seen by Manifold Times, noted Coastal Oil allegedly entering into a bunkers contract with Sinfeng for the supply of 25,000 metric tonnes (mt) of fuel oil on 26 September 2018. CMB verified the bunkers contract with the reference number TGS/1809-034 on 90-day payment terms with both parties and allowed draw down of USD 10 million (exact: USD 9,971,752.84) under a loan facility to Coastal Oil.

However, Coastal Oil went into voluntary liquidation on 13 December 2018 and this resulted in CMB’s cancellation of the loan facility on 14 December 2018.

On 14 December 2018, CMB’s representatives went to Sinfeng’s office to seek confirmation that Sinfeng would be paying the assigned proceeds to CMB under invoices from Coastal Oil totalling USD 12.5 million.

However, a Sinfeng staff denied there was a contract with the reference number TGS/1809-034 on 90-day payment terms and further claimed Sinfeng’s stamp and his signature on the 90-day contract were forged.

Instead, he said he had signed the acknowledgement for a different contract with Coastal Oil bearing the same reference number which was on cash-in-advance (CIA) payment terms.

He also denied Sinfeng owing Coastal Oil any money as it alleged that all transactions, including the payment on the invoices, between Coastal Oil and Sinfeng had been performed.

Sinfeng’s lawyers on around 16 January 2019 further emailed CMB’s lawyers with alleged copies of the CIA contract and Sinfeng’s bank remittance advice evidencing payment of USD12,486,600.00 to Coastal Oil’s bank account with CMB, amongst other documents.

CMB’s lawyers subsequently wrote to Sinfeng several times seeking further documents to support Sinfeng’s claim that the 90-day contract was a sham. Sinfeng did not accede because the documents provided were in its view sufficient.

Eventually, CMB took out OS 635/2019 at the High Court of the Republic of Singapore to seek pre-action discovery of the following documents from Sinfeng.

“I was satisfied that discovery of the documents sought in OS 635/2019 should be granted in relation to Sinfeng as CMB required the information to frame an appropriate cause of action,” stated Justice Tan in his Grounds of Decision document.

“The gap in CMB’s knowledge was whether the CIA contract was genuine. That was a critical gap to fill because, as CMB submitted, whether CMB had any basis to bring a claim in misrepresentation, fraud or conspiracy to injure would turn on the answer to that question. It was incorrect for Sinfeng to state that CMB had an assignment claim regardless of whether the CIA contract was genuine. In an assignment, the benefits of the contract are transferred to an assignee, with the assignor remaining bound to perform its obligations under the contract.

“Thus, CMB’s claim as an assignee was inextricably dependent on the validity of the underlying contract, which in this case was the 90-day contract. But because the CIA contract and the 90-day contract bore the same reference number, the genuineness of both contracts was a serious issue that formed CMB’s pivotal consideration in deciding whether to proceed against Sinfeng. It would be unlikely for both versions of the contract to be genuine at the same time unless there was an honest careless mistake somewhere, which neither party contended was the case.”

Justice Tan further wrote: “Pre-action discovery would also enable CMB to decide whether to bring a fraud action against only Sinfeng or to join CO [Coastal Oil] and its directors on grounds of conspiracy to defraud, as the bunkers contract (for which CMB was a beneficiary) was entered into between CO [Coastal Oil] and Sinfeng. In my view, OS 635/2019 was necessary for CMB to frame proper causes of action against the appropriate defendants. Therefore, pre-action discovery was necessary for costs savings and also for fair disposal of the matter.”

“Sinfeng in its submissions alleged that it had paid CMB US$12,486,600 for the bunkers deal and so CMB suffered no loss. In the course of the hearing, I sought clarification from Sinfeng’s counsel and it was disclosed that the payment of US$12,486,600 was paid to CO [Coastal Oil], which had an account with CMB. I informed Sinfeng’s counsel that payment to CMB and payment to CO [Coastal Oil]’s bank account with CMB were completely different. She acknowledged the mistake. Therefore, it was incorrect and misleading for Sinfeng’s counsel to state categorically that Sinfeng had paid CMB US$12,486,600.”

A complete coverage of the events leading to the current development has been arranged by Singapore bunker publication Manifold Times (in descending date order) below:

Related: Fraud suspected in Coastal Oil Singapore case, says COSCO
RelatedCoastal Logistics owned “Atalanta”, “Babylon” to undergo auction
RelatedSingapore: Bunker tanker “Coastal Mercury” arrested
RelatedHeng Tong Fuels & Shipping in court over DBS Bank bunker tanker loan
RelatedCoastal Logistics owned MR tanker "Babylon" arrested
RelatedFraud suspected in Coastal Oil Singapore case, says COSCO
RelatedCoastal Oil Singapore: Creditor list surfaces in bunker market
RelatedSingapore: Bunker tanker “Coastal Neptune” arrested
RelatedCoastal Oil Singapore creditors meeting scheduled on 10 Jan
RelatedCoastal Oil Singapore in US $380 million debt to at least 10 banks
RelatedSingapore: Coastal Logistics owned MR tanker "Atalanta" arrested
RelatedHeng Tong Fuels & Shipping, Coastal Logistics tankers enter S&P market
RelatedCoastal Oil Singapore to hold creditors meeting on 28 Dec
RelatedBreaking news: Coastal Oil Singapore under liquidation

Photo credit: Manifold Times
Published: 11 October, 2019


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