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DBS Hong Kong building case against Sinfeng over alleged ‘fraudulent misrepresentation and/or conspiracy’

20 Apr 2021

Legal representatives of DBS Bank (Hong Kong) Limited will be submitting an application to the High Court of the Republic of Singapore on Wednesday (21 April) to start a suit against Sinfeng Marine Services Pte Ltd (Sinfeng, or defendant), according to documents obtained by Singapore bunkering publication Manifold Times from the court.

The financial institute is seeking pre-action discovery, for the release of relevant documents between Sinfeng and the defunct bunkering firm Coastal Oil Singapore Pte Ltd. (Coastal Oil), to determine the type of legal action it should commence against Sinfeng going forward.

Background of DBS involvement with Coastal Oil

DBS Bank Hong Kong (DBS, or plaintiff) earlier issued a USD 30 million credit facility to Coastal Oil and is seeking to recover the debt.

It claims Sinfeng entered into five contracts with Coastal Oil between October to November 2018, where Coastal Oil assigned to DBS its receivables. However, Coastal Oil was shortly placed in creditors’ voluntary liquidation on 13 December 2018.

The bunkering firm owed approximately USD 357 million to 79 companies, of which USD 354 million was owed to major banks (including DBS).

‘Curious relationship’ between Sinfeng and Coastal Oil

DBS noted it has received reports from liquidators of Coastal Oil which indicate there may have been fraudulent conduct where executed documents were not genuine.

A liquidator report on 2 December 2019 revealed a trading loop between Sinfeng, Coastal Oil and Arkanata Yasa Trading Pte. Ltd. (Yasa) where the details are as follows:

  • Coastal Oil sends deal recap emails to Sinfeng for confirmation, identifying Yasa as the end buyer
  • Instruction from Coastal Oil for transfer of funds: Coastal Oil transfers to Yasa; Yasa instructed to transfer to Sinfeng
  • Coastal Oil sends bunker delivery note to Sinfeng
  • Sinfeng transfers funds to Coastal Oil, completing the circular transaction / funds transfer loop.

The liquidator document further identified a former Coastal Oil Treasury Officer, who is currently facing 63 charges for allegedly creating fictitious sales contracts and submitting them to banks in order to obtain financing, placing Yasa as an end-buyer.

Further, the same report stated invoices issued to Sinfeng between July to December 2018 being accompanied by the Bunker Delivery Note issued by PT Farma Kimia Distribution, which is an unknown entity that the liquidators have not been able to locate or contact.

“At the bare minimum, the abovementioned circumstances call into question the authenticity of the transactions between the Defendant and Coastal Oil (which formed the basis of Coastal Oil’s Financing Applications with the Plaintiff),” stated the bank.

“Further, it lends itself to the possibility that the Defendant is part of a broader conspiracy with Coastal Oil.

“However, I am advised and verily believe that the Plaintiff requires additional documents before it is able to come to a firm landing as to whether it should commence action against the Defendant.”

DBS request for payment results in validity dispute

DBS sought payment from Sinfeng after Coastal Oil underwent voluntary liquidation on 13 December 2018 by sending a request to ask payment for US$27,190,988.28 from Sinfeng on 19 December 2018 regarding three contacts.

On 26 December 2018, the bank however received a letter from Sinfeng disputing the validity of the three contracts.

According to the bank, the Sinfeng contracts were affixed by its authorised representative, namely Liang Yu Wei (Mr Liang), with the company’s seal. However, further communication between DBS and Sinfeng suggested of Coastal Oil allegedly being in possession of Mr Liang’s signature stamp.

“The Defendant did not proffer any explanation as to how Coastal Oil would have come into possession of Mr Liang’s signature stamp, since Mr Liang was an authorised representative of the Defendant,” stated DBS.

“Even if the Sinfeng Contracts are revealed to be sham contracts as the Defendant claims, it would no doubt have been difficult for Coastal Oil to duplicate Mr Liang’s signature stamp without additional help.”

Reasons behind application for pre-action discovery

DBS alleged Sinfeng to date has not provided “any assistance” into the matter to ascertain whether the Sinfeng Contracts are genuine; as such, it is seeking pre-action discovery of the relevant documents to do so.

“I understand that based on the available facts, the Plaintiff believes that it potentially has a claim against the Defendant as an assignee of receivables under the Sinfeng Contracts, for fraudulent misrepresentation and/or conspiracy,” stated DBS.

“However, the Plaintiff is not in a position to commence proceedings yet as it presently has insufficient facts to mount a claim.”

The bank added: “If the Sinfeng Contracts are genuine, then the Plaintiff may proceed against the Defendant for failing to make payment under the Assignment.”

“On the other hand, if the Sinfeng Contracts are found to be sham contracts, then the Plaintiff may take action against the Defendant for losses suffered on account of the fraud perpetrated on the Plaintiff and/or the fraudulent misrepresentation exercised on the Plaintiff when the Defendant signed the Acknowledgements.”

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: Sinfeng Marine wins appeal to withhold additional documents from Coastal Oil liquidators
Related: Sinfeng appeals against release of Coastal Oil contract docs; China Merchants Bank suspects fraud
RelatedSingapore: Former Coastal Oil employees face forgery charges over fake sales contracts
RelatedCoastal Oil hearings progress, court grants liquidators access to Sinfeng documents
RelatedChina Merchants Bank legal suit with Sinfeng over alleged $13 million debt progresses
RelatedFraud 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: 20 April, 2021

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