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Malayan Banking Berhad, Singapore Branch v Legend Six Holdings Ltd And Another

Judgment Cited authorities 17 Cited in Precedent Map Related
Vincent
Judgment Date28 May 2020
Neutral Citation[2020] HKCFI 990
Year2020
Judgement NumberHCMP2182/2019
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP2182/2019 MALAYAN BANKING BERHAD, SINGAPORE BRANCH v. LEGEND SIX HOLDINGS LTD AND ANOTHER

HCMP 2182/2019

[2020] HKCFI 990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2182 OF 2019

____________

IN THE MATTER of an application for pre-action discovery pursuant to Order 24 rule 7A of the Rules of the High Court (Cap. 4A) and section 41 of the High Court Ordinance (Cap. 4)

and
IN THE MATTER of an application for Norwich Pharmacal Order and Bankers Trust Order pursuant to the Inherent Jurisdiction of the Court

____________

BETWEEN

MALAYAN BANKING BERHAD, SINGAPORE BRANCH
 Applicant

and
LEGEND SIX HOLDINGS LIMITED 1st Respondent
BANK OF CHINA (HONG KONG) LIMITED 2nd Respondent

Before: Deputy High Court Judge Hall-Jones in Chambers

Date of Hearing: 5 May 2020

Date of Decision: 28 May 2020

________________

D E C I S I O N

________________


1. This matter concerns the plaintiff’s application, made by Originating Summons dated 26 November 2019, for the following:

(1) Pre-action discovery against the 1st respondent, Legend Six Holdings Limited (“Legend Six”); and

(2) Norwich Pharmacal and/or banker’s books orders for third party discovery against the 2nd respondent, Bank of China (Hong Kong) Limited (“BOC”).

2. BOC has adopted a neutral position in relation to the relief sought against it and was excused from attending the substantive hearing.

A. FACTUAL BACKGROUND

3. In the plaintiff’s case, by a letter of offer (“LOA”) dated 10 May 2018, the plaintiff offered loan facilities to a Singapore company known as Inter-Pacific Petroleum Pte Ltd (“IPP”). IPP is said to have been a purchaser of fuel oil, carrying on the business of bunker trading.

4. Clause 6 of the LOA stated that the purpose of the facilities was, among other things, for IPP’s trade financing in petroleum products. The LOA was secured by, inter alia, a personal guarantee dated 10 May 2018 given by Ms Cheung Lai Na, a Hong Kong resident (“Cheung”).

5. Between June and August 2019, IPP applied for twelve letter of credit from the plaintiff (“the L/Cs”). The beneficiaries of these L/C’s were two Singaporean companies, namely Citus Pte Ltd (“Citus”) and its subsidiary Citus Trading Pte Ltd (“CTPL”).

6. The plaintiff asserts that documents submitted by IPP with each L/C were along these lines:

(1) IPP represented to the plaintiff that it was purchasing fuel oil from Citus and/or CTPL, upon which IPP would on-sell the goods to other third parties including Mercuria Energy Trading Pte Ltd, Sinochem International (Singapore) Pte Ltd and PETCO Trading Labuan Company Ltd (“the Customers”);

(2) The above transactions were allegedly supported by sales contracts between IPP and Citus/CTPL, contracts between IPP and the Customers, and invoices issued for the transactions by IPP and Citus/CTPL.

7. We then turn to Legend Six. From the plaintiff's submissions, it is asserted that the goods supplied by Citus/CTPL to IPP were previously supplied by Legend Six. In short, the fuel oil is said to have been sold from Legend Six, to Citus/CTPL, to IPP and then to the Customers.

8. During the period June to August 2019, Citus/CTPL presented the L/Cs to the plaintiff for discounting. The applications for discount were evidently supported by bills of lading where:

(1) The shipper was Legend Six. The goods to be shipped were stated to be “RMG 380 CST” fuel oil;

(2) The port of loading for all shipments were Malaysian and the purported destination was Singapore;

(3) Each of the B/Ls was purportedly signed by the vessel’s master accompanied with the master’s chop.

9. The plaintiff then discounted the L/Cs on a full recourse basis and credited the relevant funds to Citus and CTPL’s USD bank accounts with the plaintiff. Thereafter, Citus/CTPL gave instructions to the plaintiff to transfer the funds (less certain amounts) to Legend Six’s account with BOC.

10. However, in the plaintiff’s case, this raft of purported transactions turns out to have been a fraud. In August 2019, the plaintiff’s Singapore solicitors wrote to the Customers, reminding them to make payment for invoices issued by IPP (and which had been assigned to the plaintiff by way of a deed of charge dated 23 April 2014).

11. No doubt to the consternation of the plaintiff, each of the Customers denied that they had signed any contracts at all with IPP for the purported transactions. On this basis, they each denied liability to make the requested payments.

12. Upon separate inquiry, ten of the ship owners of the relevant vessels stated that none of the purported shipments had in fact taken place and that the bills of lading were all forged.

13. The plaintiff describes this state of affairs as “a classic letters of credit fraud”, perpetrated against the plaintiff. The plaintiff maintains that IPP, Cheung, Citus, CTPL, Legend Six and potentially others, were parties to this fraud. Specifically, the plaintiff asserts that:

(1) Legend Six entered into fraudulent sales contracts with Citus or CTPL, in that there were no underlying sales of oil cargoes by Legend Six to Citus or CTPL;

(2) In turn, Citus or CTPL entered into fraudulent sales contracts with IPP, again with no underlying sales of oil cargoes;

(3) IPP applied for the twelve L/Cs from the plaintiff on the basis of “fictitious” sales of oil cargoes using forged documents, and Citus or CTPL applied to the plaintiff for discounting of the L/Cs using forged bills of lading, when there had been no actual loading of the oil cargoes onto the vessels in question;

(4) The plaintiff discounted the L/Cs and credited the relevant funds to Citus and CTPLs’ accounts, which funds were then transferred to the Legend Six BOC Account;

(5) Further, on 20 August 2019, shortly after L/C’s in this case were presented to the plaintiff and funds were transferred by the plaintiff to Legend Six, IPP applied to the High Court of Singapore for appointment of judicial managers. A formal order for judicial management was made by the Singapore courts on 4 September 2019.

14. The plaintiff also asserts that IPP, Legend Six and Cheung (amongst others) have defrauded another bank, Société Générale, Singapore Branch (“SocGen”), in a similar way. I was referred in this regard to the ongoing proceedings in HCA 1617/2019 (see Société Générale, Singapore Branch v Inter-Pacific Group Ltd & Ors [2019] HKCFI 2405, [2019] HKCFI 2947) (“the SocGen Proceedings”). I shall return to these proceedings in more detail below.

15. Mr Dawes SC, appearing for the plaintiff, states that the plaintiff intends to bring an action in the Hong Kong High Court against Legend Six, IPP, Cheung, Citus and CTPL and potentially others (together the “Intended Defendants”) to recover the sum of US$ 66,323,521.65, being the sum said to be due and owing under the facilities granted by the plaintiff and/or as a result of the fraud described above. The present applications are made to support such an action.

16. For clarity, I mention here that dollar amounts referred to in this decision are references to United States dollars, unless otherwise stated.

17. At this stage, Legend Six has elected to remain largely silent as to these allegations, save to say that its sole director and shareholder, Mr Chen Chun John (“Chen”) asserts that he has no knowledge of the alleged transactions or fraud, nor any knowledge of the SocGen Proceedings. Legend Six also submits that not all of the L/C payments went to Legend Six.

B. OVERVIEW OF MATTERS ADDRESSED

18. I shall address the arguments of the parties in sections, as follows: overview of the SocGen Proceedings (section C); pre-action discovery against Legend Six (section D); Norwich Pharmacal and banker’s books orders against BOC (section E); defence of privilege against self-incrimination (section F); and decision and costs (section G).

C. THE SOCGEN PROCEEDINGS

19. The parties in these proceedings have referred to the ongoing SocGen Proceedings, referring me in particular to two decisions therein dated 20 September and 5 December 2019. I have reviewed these decisions and comment briefly upon them below.

20. The facts recited in the first decision, from the K Yeung J, bear some striking similarities to the present case. In both cases, there is a bank seeking to recover sums said to have been fraudulently transferred in the context of allegedly fraudulent letters of credit. There is a significant commonality of protagonists in the alleged frauds, namely IPP, Cheung, Legend Six and Chen. And the alleged fraudulent transfers occurred over a similar period, in mid-2019.

21. The first decision recites that SocGen, as the plaintiff in those proceedings had obtained Mareva injunctive relief as well as discovery orders. These included a banker’s books order pursuant to section 21 of the Evidence Ordinance against the Bank of China. This was in respect of the Bank of China account of the 6th Defendant in the SocGen Proceedings, namely Legend Six. It is not apparent from the first decision whether the applications for discovery and banker’s books orders were contested – and if they were, on what grounds.

22. My understanding from Counsel in the present case is that the funds frozen in the SocGen Proceedings may include funds that are the subject of the present proceedings.

23. A further feature of the first decision in the SocGen Proceedings, of which I have taken note, is that substantial sums appear to have been transferred by Legend Six to other parties shortly after the alleged fraud in that case. These include a transfer of $44.85 million to the 10th defendant in those proceedings, $24.96 million to the 8th defendant, $6.65 million to 9th defendant and $3.05 million to the...

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