Business

Singapore: Dynamic Oil Trading claiming USD 103 million from Deloitte & Touche over alleged negligence

Deloitte issued a ‘clean, unqualified opinion’ for DOT’s financial year ended 31 December 2013 on 31 March 2014 in its Audit Report and did not raise any issues or concerns regarding DOT’s financial statements.

Published

7 months ago

April 25, 2023

Admin

Lawyers representing Dynamic Oil Trading (Singapore) Pte Ltd (in creditors’ voluntary liquidation and receivership) (DOT) and Deloitte & Touche LLP (Deloitte) were scheduled to be present at the General Division of The High Court of the Republic of Singapore on 11 April 2023.

DOT was looking to claim USD 103 million from Deloitte, which was engaged to perform audit of DOT’s financial statements ending 31 December 2013, due to alleged negligence, according to the Statement of Claim (dated January 2020) obtained by bunkering publication Manifold Times.

Background of KMPG involvement

KPMG Services Pte. Ltd. (KPMG) was appointed as joint and several provisional liquidators of DOT on 18 November 2014 and appointed as joint and several liquidators of DOT on 13 February 2015.

Prior to the development, Deloitte issued a “clean, unqualified opinion” for DOT’s financial year ended 31 December 2013 on 31 March 2014 in its Audit Report and did not raise any issues or concerns regarding DOT’s financial statements, highlighted KPMG in the Statement of Claim.

As such, DOT was unaware of misconduct by any of its senior management, officers, employees, and agents for its financial year ending 31 December 2013.

“Based on this, DOT had, at all material times, been led to believe Deloitte did meet its audit obligations in respect of DOT for the 2013 Audit,” stated KPMG.

Issues between DOT, Petrotec and Tankoil

Petrotec Pte. Ltd. (Petrotec) was DOT’s primary trading partner from October 2012 to March 2013 and Tankoil Marine Services Pte Ltd (Tankoil) was its primary trading partner from March 2013 to early November 2014; both firms were collectively involved in approximately 85% of DOT’s business in 2013.

Tankoil was gradually wound up by DOT and ING Bank N.V. on 31 July 2015 and DOT has not been able to recover the overdue net balance of Tankoil’s liability to DOT amounting to approximately USD 156.3 million as of 18 November 2014 (the date when DOT entered into provisional liquidation).

KPMG, amongst discoveries, found a delay in the booking of invoices raised by DOT to Tankoil in DOT’s financial management systems giving rise to a misleading picture of DOT’s credit exposure in relation to Tankoil.

“Deloitte failed to carry out the necessary inquiries and investigations which would have led it to uncover the nonbooking or delayed booking of DOT’s invoices to Tankoil, which in turn would have enabled Deloitte to form the view that DOT did not keep proper accounting or other records and/or that its financial statements were not consistent or supported by DOT’s accounting or other records,” it stated.

When DOT entered provisional liquidation on 18 November 2014, DOT’s trade receivables amounted to approximately USD 330.5 million, of which approximately USD 222.9 million was due from Tankoil – where the gross balance due from Tankoil amounted to almost 70% of DOT’s total trade receivables.

“DOT’s trade receivables from Tankoil kept increasing in the course of 2013. This should have alerted Deloitte to make further inquiries and/or request further audit evidence as to how DOT was managing these trade receivables and why these trade receivables were not being collected,” said KPMG.

“Deloitte failed to raise issues or concerns with DOT with respect to the stated trade receivables and issued a clean, unqualified opinion.”

According to KPMG, a general trading pattern existed between Tankoil and DOT where Tankoil consistently charged DOT a unit price for bunker oil less than the unit price DOT charged Tankoil for bunker oil; essentially making a loss within this trading arrangement.

KMPG auditors further noted Lars Møller, the former managing director and finance manager of DOT, being charged with aggravated criminal breach of trust under the Danish Criminal Code on 12 July 2017 and convicted of the same on 30 May 2018 by the Court of Aalborg in Denmark. His conviction was enhanced by the 1st Division of the Danish Western High Court on 14 June 2019 to that of fraudulent abuse of a particularly gross nature.

“Had DOT been aware of its true financial position and/or the weaknesses in the design or operation of the accounting and internal control system, the full extent of the impairment of receivables due from Tankoil and/or the unlawful actions by Lars and/or any other officer, employee or agent of DOT would have been discovered earlier and in any event before November 2014 (when the OWB Group collapsed globally) or any earlier date on which DOT knew the extent of impairment of receivables and/or DOT would not have carried on trading with Tankoil and/or DOT’s shareholders would have placed DOT in liquidation earlier and would have avoided incurring further substantial amounts of unpaid receivables,” stated KPMG in the legal document.

KPMG auditors estimated DOT incurred a loss of approximately USD 103 million, being the difference between:

Approximately USD 127 million, being DOT’s net liabilities (excluding irrecoverable Tankoil balances) as at the date of liquidation on 18 November 2014; and
Approximately USD 24 million, being DOT’s net liabilities (excluding irrecoverable Tankoil balances) as at 31 December 2013 as stated in reflected in the audited accounts dated 31 March 2014.

In November 2018, Deloitte was the subject of investigations led by the Danish Business Authority regarding “significant deficiencies in the work performed” in the auditor’s statements of the O.W. Bunker group.

Stakeholders of the defunct bunkering firm O.W. Bunker A/S (currently in insolvency proceedings) launched a similar claim against Deloitte for damages over “breach(es) of their contractual obligation(s) and/or dut(ies) in their audit of the financial statements of Dynamic Oil Trading (Singapore) Pte Ltd (now in creditors’ voluntary liquidation and receivership), thereby resulting in the Plaintiffs suffering loss and damage.”

Photo credit: Manifold Times
Published: 25 April, 2023

Vessel Arrest

Malaysia: MMEA detains tanker for illegal anchoring in East Johor waters

Panama-registered vessel was operated by 17 crew members, aged between 21 to 58 years, from Pakistan, India and Bangladesh.

Published

19 hours ago

November 29, 2023

Admin

Malaysia: MMEA detains tanker for illegal anchoring in East Johor waters

The Malaysian Maritime Enforcement Agency (MMEA) on Tuesday (28 November) said a Panama-registered tanker has been detained for illegally anchoring in East Johor waters on 27 November.

MMEA Tanjung Sedili Zone acting director Maritime Cmdr Mohd Najib Sam said the tanker was detained by a patrol boat at 11am at 15.8 nautical miles northeast of Tanjung Penawar.

The captain of the vessel failed to produce any documents that permission had been obtained to anchor in Malaysian waters.

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The vessel was operated by 17 crew members, aged between 21 to 58 years, from Pakistan, India and Bangladesh.

The case will be investigated under Section 491B(1)(L) of the Merchant Shipping Ordinance 1952 for anchoring without permission. If found guilty, individuals may be fined not exceeding MYR 100,000 or face an imprisonment term of not more than two years, or both.

Manifold Times previously reported law firm Oon & Bazul LLP sharing on steps shipowners should keep in mind before anchoring and conducting STS operations in Malaysian waters to avoid detention.

Photo credit: Malaysian Maritime Enforcement Agency
Published: 29 November, 2023

Alternative Fuels

DNV paper outlines bunkering of alternative marine fuels for boxships

Third edition of its paper series focuses on LNG, methanol and ammonia as alternative bunker fuel options for containerships; explores bunkering aspects for LNG and methanol.

Published

19 hours ago

November 29, 2023

Admin

DNV paper outlines bunkering of alternative marine fuels for boxships

Classification society DNV recently released the third edition of its paper series Alternative fuels for containerships, focused on LNG, methanol and ammonia as alternative bunker fuel options for containerships.

In its updated paper series, DNV examined the different alternative marine fuel options and provided an overview of the most important technical and commercial considerations for the containership sector.

It explored the bunkering technology for LNG, bunkering infrastructure for methanol, and availability and infrastructure of ammonia.

Building on the foundation laid in the second edition, which focused on the most important aspects of methanol as a fuel, this latest third edition delves deeper – exploring the technical intricacies and commercial considerations associated with adopting methanol as an alternative fuel for containerships.

Furthermore, it provides an overview of crucial aspects related to ammonia and discusses its potential as an alternative fuel for containerships.

Amongst others, the new edition of the paper looks at the following aspects:

Technical design considerations for methanol
Commercial implications of adopting methanol as an alternative fuel
Ammonia's potential as an alternative fuel
Availability, infrastructure and ship fuel technology for ammonia
Major updates based on the latest IMO GHG strategy decisions at the MEPC 80 meeting

Note: The third edition of DNV’s full paper titled Alternative Fuels for Containerships can be found here.

Photo credit: DNV
Published: 29 November, 2023

Alternative Fuels

EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Tool is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering.

Published

19 hours ago

November 29, 2023

Admin

EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Lloyd’s Register (LR) Maritime Decarbonisation Hub and Environmental Defense Fund (EDF), in collaboration with Arup, on Tuesday (28 November) introduced the Sustainable First Movers Initiative Identification Tool, a system to help shipping stakeholders align investment decisions that support the maritime energy transition away from fossil fuels.

The tool, which is presented in a preliminary findings report – The Potential of Ports in Developing Sustainable First Movers Initiatives – scores a port’s potential to produce and bunker electrofuels while delivering local environmental and community benefits in alignment with the global temperature target of 1.5 degrees Celsius set by the Paris Agreement.

“Ports can play an important role in kickstarting shipping’s decarbonisation process even before global policies are established,” said Marie Cabbia Hubatova, Director, Global Shipping at Environmental Defense Fund.

“By considering the impact sustainable first mover initiatives can have on port-side communities, climate, environment and economies, resources can be better directed to locations where these initiatives will make the biggest difference.”

With close to two billion people living near coastal zones globally, the role of, and impacts on local port communities must be intentionally considered as the sector decarbonises globally. Ports can play a crucial role in ensuring shipping decarbonisation efforts are done in a way that has positive impacts on port communities.

The preliminary phase of the Sustainable First Movers Initiative Identification Tool analyses 108 ports in the Indo-Pacific region according to five criteria including land suitability, air quality, renewable energy surplus, economic resilience and ship traffic.

It is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering. The combined criteria and scenario evaluation determines which ports have the greatest potential (high potential) for sustainable first mover initiatives to lead to significant emissions reductions and positive impacts in nearby communities, such as improved air quality and economic resilience.

“The transition to clean energy supply for shipping can be achieved only if stakeholders act together. Identifying potential port locations is the first step in this process,” said Dr Carlo Raucci, Consultant at Lloyd’s Register Maritime Decarbonisation Hub. “This approach sets the base for a regional sustainable transition that considers the impacts on port-side communities and the need to avoid regions in the Global South lagging behind.”

Regions in the Global South are fundamental in driving the decarbonisation of shipping. To make this transition effective, the rate at which different countries adopt and scale up electrofuels must be proportional to the difference in capital resources globally to avoid additional costs being passed on to local communities. Sustainable first mover initiatives can play an important role in making this happen by ensuring the sector’s decarbonisation is inclusive of all regions and by engaging all shipping stakeholders, including port-side communities.

“There’s a huge opportunity for early adopter shipping decarbonisation initiatives to unlock benefits for people and planet – shaping the way for a more equitable transition in the 2030s,” said Mark Button, Associate, Arup. “Our collective approach shows that taking a holistic view of shipping traffic, fuel production potential and port communities could help prioritise action at ports with the greatest near-term potential.”

The tool can be customised according to stakeholders’ needs and goals and is dependent on scenario desirability. The next phase of this work will include the selection and detailed assessment of 10 ports to help better understand local needs and maximise the value offered by sustainable first mover initiatives.

LR and EDF carried out a joint study on ammonia as shipping fuel, and LR and Arup have collaborated on The Resilience Shift study focused on fuel demand for early adopters in green corridors, ports, and energy systems, amongst many other projects.

Photo credit: Lloyd’s Register
Published: 29 November, 2023