(2023) Sgca (I) 7

IN THE COURT OF APPEAL OF THE REPUBLIC OF SINGAPORE
[2023] SGCA(I) 7
Civil Appeal from the Singapore International Commercial Court No 2

of 2022
Between
Crédit Agricole Corporate and

Investment Bank, Singapore
Branch
… Appellant
And
PPT Energy Trading Co. Ltd.
… Respondent
In the matter of SIC/S 1/2021
Between

Branch
… Plaintiff
And
… Defendant
Civil Appeal from the Singapore International Commercial Court No 3

of 2022
Between
Branch
… Appellant
And
… Respondent
In the matter of SIC/S 2/2021
Between

… Plaintiff
And

Branch
… Defendant
JUDGMENT
[Bills of Exchange and Other Negotiable Instruments — Letter of credit

transaction]
[Credit and Security — Guarantees and indemnities — Contracts of
indemnity]
ii
This judgment is subject to final editorial corrections approved by the
court and/or redaction pursuant to the publisher’s duty in compliance
with the law, for publication in LawNet and/or the Singapore Law
Reports.
Crédit Agricole Corporate & Investment Bank,

Singapore Branch
v
PPT Energy Trading Co Ltd and another appeal
[2023] SGCA(I) 7
Court of Appeal — Civil Appeal Nos 2 and 3 of 2022

Judith Prakash JCA, Jonathan Hugh Mance IJ and Bernard Rix IJ
19, 20 October 2022
24 October 2023 Judgment reserved.
The Court:
Introduction
1 These appeals arise out of two cases heard by the Singapore

International Commercial Court (“SICC”), SIC/S 1/2021 (“Suit 1”) and
SIC/S 2/2021 (“Suit 2”). Crédit Agricole Corporate & Investment Bank,
Singapore Branch (“CACIB”) was the plaintiff in Suit 1 and the defendant in
Suit 2. PPT Energy Trading Co. Ltd. (“PPT”) was the defendant in Suit 1 and
the plaintiff in Suit 2. The Judge in the SICC (the “Judge”) dismissed CACIB’s
claim in Suit 1 and allowed PPT’s claim in Suit 2. The reasons for the Judge’s
decisions can be found in Crédit Agricole Corporate & Investment Bank,
Singapore Branch v PPT Energy Trading Co Ltd and another suit [2022]
SGHC(I) 1 (the “Judgment”). The decision on liability was delivered on
Crédit Agricole Corporate & Investment Bank, [2023] SGCA(I) 7
Singapore Branch v PPT Energy Trading Co Ltd
13 January 2022, but the issues of damages, interest and costs were dealt with
in his subsequent order made on 30 March 2022.
2 CACIB appealed against the Judge’s decision in both Suits. Although

two appeals were filed, CACIB raised the same issues in substance in both.
3 The background to CACIB’s claims below was that CACIB had been
induced by the fraud of Zenrock Commodities Trading Pte Ltd (“Zenrock”) to
issue an unconfirmed letter of credit dated 3 April 2020 subject to The Uniform
Customs and Practice for Documentary Credits 600 (“UCP 600”) in favour of
PPT. Payment under the letter of credit was due 60 days after the bill of lading
date. As the original bills were issued on 6 April 2020, the due date for payment
was therefore 5 June 2020. In Suits 1 and 2, CACIB sought the following
remedies:
(a) an injunction to restrain payment of any sums under the letter of

credit;
(b) a declaration that PPT was not entitled to receive any sums under
the letter of credit at that date or at all and that CACIB was not liable for
any sum under the letter of credit; and
(c) an order that PPT reimburse CACIB for sums debited pursuant
to the terms of the letter of credit together with interest; or
(d) if PPT was so entitled to receive payment under the letter of

credit, then a finding that PPT was liable, under a letter of indemnity
(the “LOI”) which PPT issued to CACIB in lieu of presentation of
shipping documents under the credit, to indemnify CACIB for any and
2
all such losses arising from PPT’s breaches of the representation and
warranties in the LOI.
4 In the course of the proceedings below, CACIB took out an ex parte

application (of which PPT, but not Zenrock, was given notice) for payment
under the letter of credit to be prohibited, which resulted in the issuance of an
interim injunction on 28 May 2020 (the “Interim Injunction”) prohibiting
payment under or pursuant to the letter of credit. After negotiations, an
accommodation was reached between CACIB and PPT pursuant to which the
Interim Injunction was to be discharged and payment under the letter of credit
was to be made by CACIB to PPT. This payment was made in return for a bank
guarantee from PPT’s bank, Bank of China (“BOC”) for reimbursement, should
the court hold that CACIB’s original refusal to pay was justified. The guarantee
was secured by the blocking, in an escrow account, of the amount paid by
CACIB as counter-security for BOC’s guarantee. CACIB made the payment
under the letter of credit to PPT on 18 November 2020. PPT therefore cross-
claimed for a declaration that payment was due under the credit, and for
damages for non-payment, including the costs of obtaining the guarantee and
the borrowing costs of a loan from a subsidiary company.
5 The trading background to Zenrock’s fraud on CACIB raises numerous

questions, though not all of them are answerable on the available material. That
Zenrock committed fraud was undisputed by both parties. To facilitate its
purchase of crude oil from PPT for on-selling to Total Oil Trading SA
(“TOTSA”), Zenrock had applied for a letter of credit to be issued by CACIB
in favour of PPT:
3
(a) The credit for which Zenrock applied was to be operable against
the presentation of shipping documents including signed bills of lading
and PPT’s signed commercial invoice referring to the shipment FOB of
920,000 net US barrels (plus or minus 5%) of crude oil from Djeno in
the Congo (the “Cargo”).
(b) The unit price of the Cargo was stated to be the average of the
mean quotations published in Platt’s crude oil marketwire under the
heading Brent Dated (the “Brent rate”) on the bill of lading date plus a
premium of US$3.24 per barrel.
(c) The letter of credit also provided that “in case” such shipping
documents “[were] not available at time of presentation”, then payment
was to be made upon the presentation of the beneficiary’s signed
commercial invoice and the beneficiary’s signed LOI.
6 To obtain credit facilities from CACIB, Zenrock had previously

executed a deed of charge in favour of CACIB, which granted to CACIB a
floating charge on all goods financed by CACIB. Zenrock also had to provide
CACIB with an assignment of the receivable which Zenrock would obtain under
the on-sale covering the amount which CACIB would have to disburse to PPT
under the credit (Judgment at [37]). Zenrock had a sale contract dated 30 March
2020 for the sale of Djeno crude oil to TOTSA, but it was at a price of only the
Brent rate minus US$3.6 per barrel. Zenrock simply doctored a copy of its sale
contract with TOTSA to make it appear to CACIB that the price under the
TOTSA contract was the Brent rate plus US$3.6 per barrel, thereby covering
the amount of the proposed credit (Judgment at [3]–[4]). CACIB on 1 April
2020 gave notice to TOTSA of the assignment of the TOTSA receivable, which
TOTSA counter-signed on 3 April 2020.
4
7 The effect of Zenrock’s fraud is evident from the actual invoice issued
by Zenrock to TOTSA, which related to a bill of lading quantity of 920,191.814
net US barrels shipped from Djeno on the vessel Indigo Nova on 6 April 2020
at a unit price of US$17.95 per barrel, making US$16,517,443.06 the total
amount payable to Zenrock. In contrast, the amount payable by reference to the
same shipment under the credit which Zenrock induced CACIB to issue in
PPT’s favour was US$25.715 per barrel, making a total of US$23,662,732.50.
This latter amount is nearly US$8 more per barrel than the former and was about
50% higher than the market price.
8 The wider trading background reveals further peculiarities. First,

TOTSA was not only Zenrock’s buyer, but also was at the head of a chain under
which it sold 920,000 net US barrels (5% plus or minus) FOB Djeno to SOCAR
Trading SA (“SOCAR”), which on 26 March 2020 on-sold the same amount to
Zenrock (Judgment at [10]).
9 Second, to finance its purchase from SOCAR, Zenrock had applied to

ING Bank NV (“ING”) for a credit in SOCAR’s favour, had assigned to ING
its receivable under its contract with TOTSA and executed a deed of charge
creating a floating charge over all goods financed by ING as well as over
“unencumbered goods” not financed by ING (Judgment at [36]). SOCAR had
on 31 March 2020 given notice to TOTSA of Zenrock’s assignment. However,
on 1 April 2020, Zenrock had asked TOTSA not to approve ING’s assignment,
saying that there had been a mistake and that the receivable to be assigned to
TOTSA had actually been assigned to CACIB. It appears that Zenrock, short
no doubt of cash, had decided to defraud CACIB by introducing a small circle
of over-priced contracts which CACIB would be induced to support by
Zenrock’s production of the doctored copy of its contract for on-sale to TOTSA.
5
10 Third and most significantly, Zenrock’s original approach to PPT had

been to seek PPT’s involvement in a different circular trade, which would have
involved Zenrock on-selling to PPT the cargo acquired from SOCAR, with PPT
on-selling such cargo to another company, Trafigura Pte Ltd (“Trafigura”),
which would re-sell to Zenrock, which would deliver it under the final TOTSA
contract. The Judge found that, in the course of exchanges about such an
involvement, PPT became aware of its circularity and that Zenrock wished PPT
to avoid using CACIB to finance its proposed purchase from Zenrock, because
Zenrock and Trafigura were already using CACIB and did not want CACIB to
“see the whole chain” (Judgment at [52]–[65]).
11 In the event, Trafigura was eventually withdrawn from this proposed

circle. On or about 1 April 2020, Zenrock arranged the interposition of PPT into
a different trading circle, involving the purchase by one Shandong Energy
International (Singapore) Pte Ltd (“Shandong”) from Zenrock of the Cargo at
Brent rate plus US$3.02 per barrel and a sale by Shandong to PPT at Brent rate
plus US$3.02 per barrel (Judgment at [74]). PPT was presented with
arrangements made by Zenrock for both its purchase from Shandong and its on-
sale back to Zenrock. PPT denies that it was aware of any circle, but the Judge
found, on the evidence and in the light of all the circumstances, that it was
impossible to believe that PPT was unaware, when it committed itself to this
transaction, of the circularity involved in Zenrock’s purchase from SOCAR,
SOCAR’s on-sale to Shandong and Shandong’s on-sale to PPT (Judgment at
[113]).
12 The reasons for these circular arrangements are unknown, though

circularity can and does occur in commodity dealing, both designedly and
fortuitously (see Garnac Grain Company Incorporated v HMF Faure &
6
Fairclough Ltd and another [1966] 1 QB 650 (at 679, 683–684) and UniCredit
Bank AG v Glencore Singapore Pte Ltd [2022] SGHC 263 (at [50]–[65])). In
those cases, the motive was the cheaper financing that a simultaneous sale and
buy-back using a letter of credit could provide, as compared to ordinary
borrowing. The Judge in the present case held that all the contracts in the
expanded chain (including the circle of transactions from Zenrock to Shandong
to PPT and back to Zenrock, despite its artificially high prices) were intended
to and did operate as genuine contracts, under which property passed (Judgment
at [123]–[125]). Since all the contracts were on TOTSA’s terms and conditions,
property passed under each on shipment FOB from Djeno. The transfer of any
shipping documents would therefore operate at most as a transfer of a
possessory interest, by way of security, giving a right to delivery up of the Cargo
at its destination port.
13 Not surprisingly, a main issue at trial was how much further PPT’s
understanding stretched, “what the PPT personnel thought was going on and
what was the reason for this circular trading” (Judgment at [114]). CACIB’s
case was that PPT knew of or shut its eyes to fraud. But the Judge found on the
evidence that PPT did not. PPT, on their own account, was “not a very large
company” with little trade, which leaped at the opportunity, given from time to
time by Zenrock, to be interposed in a chain in return for a small mark-up,
without knowing or enquiring about the reason (Judgment at [41]). It was
entirely unaware that the circle into which it was interposed in the present case
involved prices far higher than the market price. To this extent, the Judge held
as follows (Judgment at [114]–[115]):
114. … Their interest was confined to the profit that they would
make and ensuring that they were secured for their sale price
under a letter of credit. They looked to BOC for advice to ensure
the latter.
7
115. In these circumstances, although PPT is hardly an

“innocent bystander”, it cannot be said to be a participant in
Zenrock’s fraudulent scheme, despite its awareness that
Zenrock had purchased the Cargo from SOCAR before buying
it from PPT, further down a chain of sales and purchases. It
cannot properly be said that PPT had actual knowledge of, or
was wilfully blind to, the fact that this was a fraudulent scheme
because it had, in this case, been offered a pre-structured deal,
similar to those that had taken place in the past, all of which
had gone through successfully without any suggestion of fraud.
…
14 Remarkable as was PPT’s ignorance of even the general level of market

prices and its disinterest in what was going on, that is the factual basis on which
these appeals proceed. There has been no attempt to disturb the Judge’s findings
on these points.
15 The anomalies in the overall position came relatively swiftly to

CACIB’s attention. TOTSA, having received notices of assignment from both
SOCAR and CACIB in respect of the amount receivable under Zenrock’s sale
to it, e-mailed ING, CACIB and Zenrock on 23 April 2020, seeking an urgent
explanation from Zenrock as to the legitimate beneficiary of the amount
receivable. Shortly thereafter, having received from CACIB a copy, TOTSA
pointed out to CACIB that it had been given a forged version of the Zenrock-
TOTSA sale contract. CACIB decided not to make any payment under the letter
of credit, but sought to investigate. On 28 May 2020, CACIB applied to the
General Division of the High Court for and obtained the Interim Injunction
restraining payment under the letter of credit (see [4] above). This remained in
force until 13 November 2020, whereafter payment was made on 18 November
2020 on the basis indicated at [4] above.
16 Under Art 14(b) of the UCP 600, CACIB had five banking days
following the presentation of the letter of credit to examine the documents and
8
to determine whether they were compliant. Under Art 16(c) read with Art 16(d),
CACIB also had, within those five days, to notify PPT or BOC as presenter of
the documents of each discrepancy on which it relied in order to refuse to honour
or negotiate. Under Art 16(f), a bank which fails to act in accordance with the
provisions of Art 16 “shall be precluded from claiming that the documents do
not constitute a complying presentation”. As CACIB did not make any
notification of any discrepancy pursuant to Art 16(c) read with Art 16(d),
CACIB was, as the Judge held, precluded under Art 16(f) from resisting
payment under the terms of the credit (Judgment at [6]–[7]). There is no appeal
against that conclusion regarding the position under the UCP 600.
The letter of credit
17 The first issue before this court is, in these circumstances, whether
CACIB was entitled to rely on Zenrock’s undoubted fraud to set aside and avoid
liability to pay under the letter of credit issued in favour of PPT.
18 It is hornbook law that a letter of credit issued by a bank in favour of a

seller-beneficiary gives rise to a binding contractual relationship, which is quite
separate or autonomous from the underlying contractual relationship between
the buyer and seller: United City Merchants (Investments) Ltd and Glass Fibres
and Equipments Ltd v Royal Bank of Canada, Vitrorefuerzos SA and Banco
Continental SA [1983] 1 AC 168 (“United City Merchants”) at 182–183. Such
an instrument is by mercantile usage enforceable immediately upon issue,
without consideration: Roy Goode and Ewan McKendrick, Goode and
McKendrick on Commercial Law (LexisNexis, 6th Ed, 2020), at para 35.51,
citing E P Ellinger, Documentary Letters of Credit, a comparative study
(University of Singapore Press, 1970) at p 122; see also United City Merchants
and Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of
9
Oil, Republic of Iraq [2018] AC 690 at [25] and [95] (per Lord Clarke and Lord
Mance). This is in accordance with the definition of a “credit” in Art 4 of the
UCP 600 which establishes the irrevocability of letters of credit from the
moment of their issue. The same principle has recently been endorsed by this
court in Kuvera Resources Pte. Ltd. v JPMorgan Chase Bank, N.A. [2023]
SGCA 28 (“Kuvera”), where this court accepted a characterisation of letters of
credit as independent and autonomous unilateral contracts with a sui generis
exception of irrevocability (at [29] and [35]).
19 CACIB’s letter of credit in favour of PPT was expressly subject to the

autonomy of a credit from underlying transactions and related contracts. This
principle as stated in Art 4 of the UCP 600 reads:
Credits v. Contracts
a. A credit by its nature is a separate transaction from the sale
or other contract on which it may be based. Banks are in no
way concerned with or bound by such contract, even if any
reference whatsoever to it is included in the credit.
Consequently, the undertaking of a bank to honour, to
negotiate or to fulfil any other obligation under the credit is not
subject to claims or defences by the applicant resulting from its
relationships with the issuing bank or the beneficiary. ….
20 The established common law exception to this rule is the fraudulent

presentation rule, that is, “where the seller, for the purpose of drawing on the
credit, fraudulently presents to the confirming bank documents that contain,
expressly or by implication, material representations of fact that to his
knowledge are untrue”: United City Merchants at 183 and Edward Owen
Engineering Ltd v Barclays Bank International Ltd [1978] QB 159 (“Edward
Owen Engineering”) at 169. Both courts in United City Merchants and Edward
Owen Engineering approved the landmark American case of Sztejn v J. Henry
Schroder Banking Corporation (1941) 31 N.Y.S. 2d 631 at 634, which affirms
10
that where the seller’s fraud has been called to the bank’s attention before the
drafts and documents have been presented for payment, the bank’s obligation
under the letter of credit should not be extended to protect the unscrupulous
seller. The same principle of course applies to an unconfirmed credit, such as
that here issued by CACIB.
21 In United City Merchants, the House of Lords rejected the “broad

proposition” that a confirming bank is not under any legal obligation to the seller
or beneficiary of a documentary credit to pay to him the sum stipulated in the
credit against a complying presentation of documents, should the documents
contain some inaccurate statement of material fact. The House of Lords noted
that this proposition, which did not require knowledge on the part of the seller
or beneficiary of the existence of the inaccuracy, would render the fraud
exception superfluous and “destroy the autonomy of the documentary credit
which is its raison d’être”: (at 184–185).In other words, the proposition would
result in an unsatisfactory situation whereby the seller’s right to payment by the
confirming bank would be contingent on the buyer’s rights against the seller
under the sale of goods contract, of which the confirming bank will have no
knowledge (at 185E). It also went on to reject a “half-way” house submission
(which the lower English Court of Appeal in United City Merchants (Investment
Ltd) and others v Royal Bank of Canada and others [1981] 3 WLR 242 had
adopted). The proposition rejected was that (United City Merchants at 187B):
… if any of the documents presented under the credit by the

seller/beneficiary contain a material misrepresentation of fact
that was false to the knowledge of the person who issued the
document and intended by him to deceive persons into whose
hands the document might come, the confirming bank is under
no liability to honour the credit, even though, as in the instant
case, the persons whom the issuer of the document intended
to, and did, deceive included the seller/beneficiary himself.
11
22 The English Court of Appeal, in accepting this half-way house approach,

had started from the premise that a bank “could refuse to pay against a document
that it knew to be forged, even though the seller/beneficiary had no knowledge
of that fact” (United City Merchants at 187F–187G). Lord Diplock doubted that
the premise was correct, even in relation to a document which was forged or a
nullity. That being said, the case before the House of Lords concerned a bill of
lading with the wrong date of loading placed on it by the carrier’s agent and that
“was far from being a nullity. It was a valid transferable receipt for the goods
giving the holder the right to claim them at their destination”: per Lord Diplock
at 188B. Lord Diplock went on to say that, even if the half-way house approach
were assumed to be correct as regards forgery by a third party, “to say that this
leads to the conclusion that fraud by a third party which does not render the
document a nullity has the same consequence appears to me, with respect, to be
a non sequitur” (at 188C). The House of Lords thus rejected the Court of
Appeal’s half-way house approach. The rejection of the proposition that a fraud
by a third party to the letter of credit could affect its enforceability is worth
noting in relation to the issue currently before this court.
23 Another established principle is that a bank issuing to a seller-

beneficiary an instrument such as the present credit is entitled to impugn the
validity of the credit by reference to any fraud or misrepresentation by the
beneficiary inducing its issue: Solo Industries UK Ltd v Canara Bank [2001]
1 WLR 1800 (“Solo”), citing Safa Ltd v Banque Du Caire [2000] 2 Lloyd’s Rep
600 (“Safa”)” at 1809E. In its submissions, CACIB focused on the reference in
these authorities and in various textbooks to a bank’s entitlement to impugn the
validity of the credit. It submits that this embraces a claim by a bank that it has
been induced by the buyer, its customer, to issue a letter of credit in favour of a
seller-beneficiary.
12
24 There is no support for CACIB’s submission. The references to

impugning the validity of an on-demand instrument like a performance bond (in
Solo) or a credit (in Safa) were confined carefully and expressly to situations
where the seller-beneficiary was party to the fraud or misrepresentation (see
Safa at 608; Solo at 1809, 1814 and 1816). Though the court in Solo (at 1814F)
said that the beneficiary in that case was seeking to impose on the bank “the risk
of being misled into entering into the instrument, when the only risks that the
bank may fairly be taken to have accepted are the risks undertaken under the
instrument, assuming it to be valid” [emphasis in original], it was identifying
the incongruity of holding a bank to an obligation which was suggested to exist
towards someone who had misled the bank into undertaking the obligation. In
other words, the court in both cases was focusing on a situation where one and
the same relationship embodied the obligation and was being impugned. One
relationship was in issue, not two autonomous relationships, as is the present
case.
25 CACIB relies on another case, Rafsanjan Pistachio Producers Co-

operative v Bank Leumi (UK) Plc [1992] 1 Lloyd’s Rep 513 (“Rafsanjan”). In
that case, the finding that the bank’s customer (the buyer, Firegreen Ltd)
obtained the issue of a letter of credit by fraud would, on CACIB’s case, have
been sufficient to defeat the seller-beneficiary’s claim, without more. However,
in Rafsanjan, both the bank, who was represented by the most experienced of
counsel in this field, and the court correctly approached the matter on the basis
that it would be necessary to prove the involvement of the seller-beneficiary in
fraud on the bank in one of three possible ways, described as “Fraud issue 1 –
alleged complicity with Firegreen’s application”; “Fraud issue 2 – taking benefit
with knowledge” and “Fraud issue 3 – fraudulent presentation of documents”
(see Rafsanjan at 525, 534–535, 539).
13
26 CACIB further invokes the second alternative ground of decision

indicated by Hirst J in Rafsanjan (at 539). In Rafsanjan, Hirst J stated:
Fraud issue 2 – taking benefit with knowledge

My conclusion in favour of the defendants on their primary case
in fraud also embraces a finding in their favour under this
second heading.
If however I am wrong in my conclusion on their primary case,
I am satisfied, having regard to my impending findings under
the third fraud case set out below, that they would be entitled
to succeed on this second basis.
It is well settled that once a fraud has been committed, not only
the original party but also every other party is precluded from
taking any benefit from it, unless there has been some
consideration moving from him, and that he becomes a party to
it as soon as he knowingly seeks to derive such benefit
(Scholefield v. Templar, (1859) Johns 155 Huguenin v. Baseley
14 Ves. 273).
Even if, contrary to my view, Mr. Mortazavi [the managing
director of the plaintiffs] was not in complicity with Firegreen,
he must have known on receipt of the [letters of credit] that each
one of them was inconsistent with the underlying transactions
… Mr. Mortazavi in evidence accepted that on their face the
[letters of credit] demonstrated that the bank was under a
misapprehension as to the underlying transactions …
As to consideration, it is plain that no consideration was given,
seeing that [the plaintiffs] had parted with the goods under all
the [letters of credit] before those [letters of credit] were issued.
Consequently [the bank] would be entitled to succeed on their
second case in fraud even if they had failed on the first.
27 The third fraud issue which Hirst J held to have been proved was to the
effect that the invoices presented under the letter of credit were, to the
knowledge of the plaintiffs/sellers, fraudulent concoctions, which misstated the
whereabouts of the goods to make it appear that they satisfied the letter of credit
requirements (Rafsanjan at 539–540). Hirst J therefore decided the third fraud
case by reference to the fraud exception identified at [20] above. The second
fraud issue which he held to have been positively established in the light of his
14
findings in relation to the third fraud issue was that, although the sellers were
not actually complicit in the buyer’s fraud, the sellers knew as soon as they
received the letters of credit that their opening had been fraudulently procured
by the buyer and took the benefit under the letters of credit without
consideration, as they did not in any way rely on the letters of credit, having
parted with the goods independently of such letters of credit (at 539). Aside
from very special facts of that nature, we do not consider that there is any more
general or presently relevant principle to be derived from Scholefield v Templar
(1859) Johns 155 (“Scholefield”) and Huguenin v Baseley 14 Ves 273
(“Huguenin”), which were cited by Hirst J. The principle in those cases that
fraud precludes not only the original party but every other party from taking any
benefit (unless there has been some consideration moving from him) – well-
known or not in other fields of the law – has made no other appearance in the
field of letters of credit or similar instruments. We think that this is for good
reason. Their principle relates to the receipt by A, without giving any
consideration, of a benefit as a result of the fraud of B, but in circumstances
which can be unravelled without prejudice to A. But, understood and applied
literally in a banking context in the width stated by Hirst J in his third paragraph
quoted at [26] above, the principle would undermine the contractual
relationships between sellers and banks which are, daily and for good
commercial reasons, treated as binding by mercantile usage even without
consideration and are relied on accordingly, even if it may subsequently emerge
that the buyer has procured the credit by fraud. Such a principle would cut
across, confuse and potentially undermine the established principles governing
letters of credit, set out in [18]–[23] above and [31] below. We therefore do not
accept that the principle in Scholefield and Huguenin has any role or application
in relation to the facts of the present case, unusual though they may be.
15
28 Further, nothing in Art 4 of the UCP 600 lends support to CACIB’s

submission. On the contrary, Art 4 states that a credit “by its nature is a separate
transaction from the sale or other contract on which it may be based” and that
consequently the bank’s undertaking to honour the credit “is not subject to
claims or defences by the applicant resulting from its relationships with the
issuing bank or the beneficiary” [emphasis added]. The autonomy of the
contractual relationships between: (a) the bank’s customer and the bank; and
(b) the bank and the seller-beneficiary is also highlighted in United City
Merchants (at 183H–184C). CACIB’s submissions fuses the two relationships
in a manner which is without precedent.
29 CACIB suggests that the principle which it invoked could be confined

to cases of nullity of, or fraud inducing, a letter of credit. We accept that, if a
credit was fabricated so as to be a nullity, and somehow issued so as to make it
appear that it came from the bank named in it, it would not be a document to
which the bank named in it was party at all. But fraud by a bank’s customer
inducing a bank to issue to a third party beneficiary a credit is not analogous to
a situation of nullity. Further, if there were (which there is not) any analogy with
the situations addressed in Solo, Safa and Rafsanjan, those cases would not
support confining relief to situations of fraud, since they expressly contemplate
that either fraud or misrepresentation by a beneficiary would suffice to enable
the court to grant relief.
30 CACIB also suggests that whether the letter of credit was confirmed is
significant. That is an irrelevant consideration in the present context. If, as
CACIB suggests, an issuing bank like CACIB might be able to invoke its
customer’s fraud but a confirming bank could not, the wholly anomalous result
would be to impose an obligation to pay on a confirming bank, in circumstances
16
where it had no right of indemnity from the issuing bank for fulfilling its
obligation. That is a risk quite outside any undertaken by a confirming bank.
31 The fundamental problem with CACIB’s case on the letter of credit is

that it would, if accepted, significantly undermine the whole system of
documentary credits. The effect would be that no seller-beneficiary could be
assured of payment under a letter of credit, without investigating the integrity
of the issuing bank’s customer in its relationship with the issuing bank, which
is a practical impossibility, or without seeking some further contractual
protection or insurance against the risk that the issuing bank’s customer may
have misled the issuing bank. Therefore, we unhesitatingly reject CACIB’s
appeal in relation to the letter of credit.
The letter of indemnity
32 The second issue that arises in these appeals concerns the promises
provided under the LOI, which PPT issued to CACIB, as called for under the
letter of credit, in the absence of bills of lading for the Cargo concerned.
33 The LOI mirrors the language set out in the letter of credit itself and
reads as follows:
LETTER OF INDEMNITY (L.O.I.)

DATE: 09 APRIL 2020
FROM: PPT ENERGY TRADING CO., LTD
TO: CREDIT AGRICOLE CORPORATE AND INVESTMENT
BANK, SINGAPORE BRANCH FOR ACCOUNT OF ZENROCK
COMMODITIES TRADING PTE LTD
We refer to our contract dated 02 April 2020 in respect of our
sale to Zenrock Commodities Trading Pte Ltd of a shipment of
920191.814 net U.S. barrels of Djeno Crude Oil shipped on
17
board the vessel Indigo Nova at the port of Djeno Terminal,

Congo with bills of lading dated 06 April 2020.
To date we are unable to provide you with the requisite shipping
documents in relation to the said sale which consist of:
1) Full set 3/3 original and 3 non-negotiable copies clean on
board bills of lading issued or endorsed to the order of Credit
Agricole Corporate and Investment Bank, Singapore Branch.
In consideration of your making payment of the full invoiced
price of USD 23,662,732.50 (and payment when due of any
subsequent shortfall apparent on any final invoicing and set out
in any final invoice) for the shipment at the due date for
payment under the terms of the above contract without having
been provided with the above documents, we hereby expressly
warrant that at the time property passed under the contract we
had marketable title to such shipment, free and clear of any lien
or encumbrance, and that we had full right and authority to
transfer such title to you, and that we are entitled to receive
these documents from our supplier and transfer them to you.
We further agree to protect, indemnify and save you harmless
from and against any and all damages, costs and expenses
(including reasonable legal fees) which you may suffer or incur
by reason of the original bills of lading and other documents
remaining outstanding or breach of warranties given above …
This Letter of Indemnity shall be governed by and construed in
all respects in accordance with the laws of England, but without
reference to any conflict of law rules. …
The validity of this Letter of Indemnity shall expire upon our
presentation to you of the aforesaid shipping documents or one
year after bill of lading date.
34 The LOI contains two relevant promises which are to be considered. The
first was PPT’s warranty that “at the time property passed under the contract
[PPT] had marketable title to such shipment, free and clear of any lien or
encumbrance”, and the second was its agreement to “protect, indemnify and
save [CACIB] harmless from and against any and all damages, costs and
expenses … which [CACIB] may suffer or incur by reason of the original bills
of lading remaining outstanding or breach of warranties given above”.
18
35 The first promise was expressly given “[i]n consideration of [CACIB]

making payment … at the due date for payment under the terms of the [letter of
credit]”. The second promise was not expressly made similarly in consideration
of payment under the credit on its due date, but the Judge held, and we concur,
that this was the natural meaning of the document, as underlined by the fact that
the indemnity was given not only against losses by reason of the bills of lading
remaining outstanding but also against losses by reason of breach of the
“warranties given above” (which were expressly given “in consideration of
payment” at the due date) (Judgment at [189]). We shall refer to the first promise
as the “Warranty”, and to the second promise as the “Indemnity”.
36 The due date for payment under the letter of credit was originally 5 June
2020, which was the same date that payment was due under the sale contract
between PPT and Zenrock (the “PPT-Zenrock Sale Contract”). It will be
recalled that on 28 May 2020 CACIB obtained its Interim Injunction against
payment under the letter of credit, and that the Injunction was later discharged
under an arrangement (described at [4] above) whereby CACIB made payment
to PPT under the letter of credit on 18 November 2020 and was protected by a
bank guarantee secured by the payment sums being placed in escrow. Interest
on that sum was subsequently awarded to PPT to cover the lateness of payment
beyond 5 June 2020 (this among other consequentials was covered by a separate
judgment given by the Judge, on the papers and without a hearing, dated
30 March 2022). The Judge hence held that PPT was entitled to interest at the
rate of 5.33% and pro rata on the said sum from 5 June 2020 to 18 November
2020.
19
The Judge’s reasoning
37 The Judge held that the LOI did not operate to protect CACIB in the
event that CACIB failed to make payment under the letter of credit. He accepted
PPT’s submission that on a true construction, the LOI required payment (and
not the mere agreement to pay) (and not merely at a later date, even if
recompensed by interest), and those requirements had not been met on the due
date (Judgment at [155]).
38 The Judge arrived at this conclusion by treating the LOI as a unilateral

contract which could only be effective when its conditions had been fulfilled.
In particular, the Judge treated the requirement of payment at the due date as a
condition. In the absence of timely payment at the due date, there was no
acceptance of the LOI which simply failed to take effect. The Judge stated
(Judgment at [155]):
Whilst this [late payment, even one day late due to an

administrative error] might appear uncommercial, CACIB had
no answer, and I do not see any answer, to this point. The
warranties plainly do not apply in the absence of a payment,
and, on the terms of the LOI, cannot apply unless there is
payment at the due date.
[emphasis in original]
39 The Judge rejected CACIB’s contention that the Interim Injunction had
extended time for payment (Judgment at [158]–[159]). Even though, as he
accepted, by reason of the injunction, it would not have been a breach of the
letter of credit not to have paid by 5 June 2020, the Judge declined to read this
situation as extending time for payment under the PPT-Zenrock Sale Contract
which was the subject-matter of the LOI. He exemplified a more usual court
order in such situations whereby payment is made and then immediately frozen.
He stressed that Zenrock was not a party to the injunction proceedings, which
20
could not therefore have affected the date for payment under its contract with
PPT. The Judge therefore concluded (Judgment at [161]):
In the result, I conclude that, in the absence of payment by

CACIB by the due date of 5 June 2020 as set out in the PPT-
Zenrock Sale Contract, PPT did not give any of the warranties
that appear in the LOI at all.
40 The Judge thereafter went on to consider in obiter whether, in any event,

the Warranty had been breached, and whether the Indemnity operated to protect
CACIB (Judgment at [162]).
41 As to the Warranty, which he treated as constituting two separate

warranties, one relating to “marketable title” and the other relating to such title
being “free and clear of any lien or encumbrance”, the Judge held that there was
no breach. PPT’s title was “marketable” in as much as ownership could and did
pass at shipment on 6 April 2020 in accordance with the terms of the sale
contracts (Judgment at [170]). The bills of lading were therefore not necessary
to pass title. As for freedom from liens and encumbrances, the impediment
relied upon by CACIB, namely the floating charges granted by Zenrock to ING
and CACIB (under earlier instruments dated 3 September 2014 and 24 August
2018 respectively) over all goods financed or to be financed by each bank,
created no proprietary interest until crystallisation; and even such crystallisation
did not affect a sale in the ordinary course of trade to a purchaser without notice
of such crystallisation. Therefore, as neither of the relevant buyers of the Cargo
(ie, neither Shandong nor PPT) had notice of the crystallisation when title
passed on shipment on 6 April 2020, there was no lien or encumbrance on the
title (Judgment at [173]–[178]). The Judge concluded (at [179]):
The position is therefore that, as at 6 April 2020, Shandong and

PPT acquired ownership of the Cargo free from any floating
charge in favour of either ING or CACIB because neither had
21
notice of crystallisation. In such circumstances, PPT’s warranty

that, at the time property in the Cargo passed under the PPT-
Zenrock Sale Contract on 6 April 2020, it had marketable title
to the Cargo which was free and clear of any lien or
encumbrance, was not broken. If the first warranty was not
broken it is common ground that the second warranty could
not be broken either. There was therefore no breach of the first
or second warranties.
42 The Judge proceeded to consider the Indemnity provided by the LOI

(Judgment at [188]). He asked himself whether any losses had been caused to
CACIB by reason of the bills of lading having been “outstanding”, ie, not
available to CACIB (Judgment at [191]). The Judge concluded that, even if the
original bills of lading had been provided, exactly the same series of events
would have taken place as did in fact take place, viz that TOTSA would not have
paid CACIB on a false invoice for an inflated price under the fraudulent
Zenrock-TOTSA sale contract, and that CACIB would not have accepted or
made use of the bills (or been able to make any straightforward use of the bills)
but would ultimately have settled with TOTSA and ING in the way which
actually occurred. Meanwhile, the vessel would have continued to its
destination in China while arguments continued between the rival claimants to
the genuine TOTSA receivable. The Judge expressed these conclusions as
follows (Judgment at [196]–[199], [202]):
196. CACIB’s case was that, if it had become a lawful holder of

the original bills of lading, it would have been able either to
obtain possession of the Cargo from the Indigo Nova or to
enforce rights of suit against the vessel for delivery to someone
who was not a holder of the original bills of lading. As PPT points
out in its submissions, however, CACIB has not advanced a
factual case that it would have accepted the documents and
become a holder of the original bills of lading as opposed to
merely being a recipient of them. …
197. I am unable to find therefore that CACIB would have
accepted the bills of lading as conforming documents and
become a lawful holder of the original bills of lading at any
particular point in time prior to the date of actual payment on
22
18 November 2020. The likelihood must be that in the

hypothetical counterfactual, some accommodation would have
had to be reached between ING, CACIB and TOTSA of the kind
which was actually made. TOTSA, in this situation, must be
taken to be prepared to pay the price under the True Zenrock-
TOTSA Sale Contract to whomsoever appeared to be entitled to
it, in accordance with the stance which it actually took, and
which led to the escrow agreement and interpleader
proceedings which were settled. Possession of the original bills
of lading was unlikely to affect this. Whilst TOTSA would have
wanted the original bills, it cannot be assumed that it would
have paid CACIB in order to obtain them and it would doubtless
have maintained that it was the true owner of the Cargo by
reason of the chain of sale contracts, regardless of the fact that
Zenrock’s round-tripping transactions had resulted in CACIB
being in receipt of the original bills of lading. It would have
maintained that CACIB was in possession of the bills by reason
of Zenrock’s fraud and in the absence of payment by CACIB
under the Letter of Credit, that it was not a lawful holder of the
bills of lading. It would have resisted any attempt to enforce
security rights as it said it would in the actual exchanges
between it and CACIB.
198. As a recipient but not a lawful holder of the original bills
of lading because of its unwillingness to accept the documents
and pay under the Letter of Credit, CACIB would be in no
legitimate position to claim delivery of the Cargo from the Indigo
Nova against presentation of those bills. It had not made any
outlay in respect of the Cargo upon which any charge could be
secured. It did not make any payment until 18 November 2020
pursuant to the arrangements reached at the suggestion of the
Judge. By then the Indigo Nova had long since discharged the
Cargo and the bills of lading could not give a right to
constructive possession of it.
199. Moreover, the Indigo Nova, on arrival at the discharge port
of Qingdao on 24 May 2020, if presented with the original bills
of lading by CACIB, would have been faced with a claim for the
Cargo by the owner of the goods to whom the property had
passed under the sale contracts, whether that be TOTSA or,
more likely, the Chinese receiving refinery to whom TOTSA
appears to have sold the Cargo. In those circumstances, it
cannot be said that CACIB would have obtained delivery of the
Cargo and it might well be thought that the superior title of the
owner would, particularly in a Chinese court, be certain to
prevail where CACIB had paid nothing.
…
23
202. CACIB has the burden of proof in establishing any loss for
which PPT would be liable to indemnify it. As appears from the
above recitation of the limited evidence available and the
inferences and assumptions which the court would have to
make in exploring the counterfactual, CACIB cannot discharge
that burden in showing the loss which it would have suffered
by reason of the original bills of lading being outstanding. The
loss which it has currently suffered is measured by the sum
paid out under the Letter of Credit which it was bound, on the
findings I have made earlier in this judgment, to pay to PPT
regardless of any fraud by Zenrock. The alleged damage is not
the result of having to pay that sum but its inability to recover
that sum from Zenrock, which had deceived it into issuing the
Letter of Credit in the first place with the Fabricated Zenrock-
TOTSA Sale Contract and the issue of the CACIB [notice of
assignment] which duplicated the ING [notice of assignment].
The reason why CACIB could not obtain the TOTSA Receivable
to cover that outlay was the duplicate assignment that Zenrock
had made. Moreover, on the final day of the hearing, it
transpired that some US$6m may have been received by CACIB
as a result of the settlement of the interpleader proceedings.
43 In sum, there was no breach of the Warranty, and no loss was proven to
have been caused by reason of the bills of lading not having been provided.
However, the Judge does not appear to have dealt expressly with the question
of the loss caused by a breach of the Warranty, had there been one. This may
have been because CACIB’s pleaded case at trial was simply that the loss
suffered both by reason of the breach of the Warranty and pursuant to the
Indemnity was on the basis that CACIB had been “deprived by PPT of being
the lawful holder of the [endorsed bills of lading] and exercising its proprietary
rights”.
The parties’ submissions
44 On appeal, CACIB submits that the Judge erred in the following main
respects:
24
(a) First, the Judge was wrong to interpret the LOI as a unilateral
contract or as ineffective because of failure to pay by 6 June 2020.
(b) In any event, the reference to payment at that date was not a
condition of the LOI, but merely served to identify (or mis-identify) the
payment obligation in question.
(c) In any event, the obligation to pay had been suspended by the
Interim Injunction.
So much on interpretation of the LOI, which was therefore an effective

instrument.
45 Then, as to breach of the Warranty, CACIB’s arguments are that:
(a) There was no marketable title at shipment where the beneficiary

of the warranty was exposed to “litigation or hazard” for various
reasons, which included Zenrock’s intention to pass title directly to
TOTSA under its earlier contract, rather than to Shandong under the
later loop via Shandong-PPT-Zenrock-TOTSA, as well as Zenrock’s
fraud and the charging of the goods under two separate floating charges.
(b) The goods were not free and clear of any lien or encumbrance,
because of the floating charges, which were registered and had in any
event crystallised by 6 April 2020, as was known at least to Zenrock,
which had deliberately deceived CACIB.
46 In relation to the Indemnity, CACIB’s submission is that the Judge had,

contrary to the evidence, adopted the wrong counterfactual to the effect that
CACIB, even if presented with the bills of lading, would have acted in exactly
25
the same way and thus never taken up the bills in order to become the lawful
holder of them. The Judge should have adopted a counterfactual that, if the bills
of lading had had to be presented, the fraud would never have taken place at all,
because the indorsed bills would have revealed the fraud.
47 Finally, as for the damages for the breach of the Warranty, CACIB’s
argument is that damages were independent of the question of an indemnity,
and depended on the position where there would have been no blight or
encumbrance on the title, in other words, where there had been no fraud by
Zenrock.
48 PPT submits that the Judge was right for the reasons which he gave. In
brief, the consideration to be given under the LOI was the payment, and not the
mere promise of payment contained in the letter of credit. The due date of 6
June 2020 under the sale contract had not been affected by the Interim
Injunction against payment under the letter of credit. There was no breach of
the Warranty, because title had been transferred down the line of contracts on
shipment, as the various sale contracts provided, without any reservation of title.
In any event, “marketable” title added nothing to freedom from lien or
encumbrance, and there could be no complaint of breach of the Warranty where
title had passed in the ordinary course of trade and without proven notice of
crystallisation of the floating charges. As for the Indemnity, there was no loss,
because CACIB would have acted in exactly the same way in disputing liability
to pay and therefore would not have taken up the documents or thus become a
holder of the bills of lading. As to loss by reason of any breach of the Warranty,
it had never been pleaded or claimed that if the Warranty had been performed,
there would have been no fraud, which in any event was a misconceived
submission. The same went for any attempt to support the indemnity quantum
26
on the submission that there would have been no fraud if the bill of lading had
been produced.
49 In these circumstances, the following issues arise for our determination

in relation to the LOI:
(a) What is the true construction and effect of the LOI? In particular,
was payment by the due date of the sale contract a condition of that
contract?
(b) If the LOI was effective at all, was there a breach of the
Warranty? In particular, was there a marketable title, free and clear of
any lien and encumbrance that was passed under the sale by PPT?
(c) If there was a breach of the Warranty, what damages were

incurred?
(d) What was the quantum of any loss to be indemnified under the
Indemnity in the absence of the bills of lading?
Issue 1: What is the true construction and effect of the LOI?
50 The Judge was of the view that the LOI was crucially a unilateral
contract, which could only be accepted by CACIB if CACIB had fulfilled the
precise conditions specified in the offer contained in the LOI. Since CACIB had
not paid the specified price “at the due date for payment [viz, 5 June 2020] under
the terms of the above contract [viz, the PPT sale contract to Zenrock]” (see [33]
above), the LOI never came into effect.
27
51 In our judgment, however, the LOI was in its context effective from the
moment of its issue. The fundamental question, therefore, is whether the
payment of the letter of credit on its due date, or, if it matters, the payment of
the amount due under the sale contract on its due date, was a condition precedent
of PPT’s obligation to indemnify CACIB.
52 The LOI was effective, for its true terms, from the date of its issue. In
the absence of the bills of lading, it was already PPT’s obligation, if it wished
to take advantage of CACIB’s letter of credit, to supply the agreed LOI, as it
was CACIB’s obligation, if the LOI was provided, to pay under the letter of
credit. This is evident from the language of the letter of credit, which states:
… Documents required against presentation of the following

documents in one original plus two copies unless otherwise
stated:
…
2) Full set of 3/3 original plus 3 non-negotiable copies clean on
board bills of lading issued or endorsed to the order of Credit
Agricole Corporate and Investment Bank, Singapore Branch
marked freight payable as per charter party.
3) Certificate of quality.
4) Certificate of quantity.
5) Certificate of origin.
In case documents No. 2 to 5 are not available at time of
presentation, then payment to be made against presentation of
following documents:
A) Beneficiary’s signed commercial invoice …
B) Beneficiary’s signed letter of indemnity …
[emphasis added]
53 The underlying arrangement therefore entailed that PPT had no option

but to provide the LOI if it wanted to be paid, and that CACIB had no option, if
28
the LOI was provided, but to pay the agreed credit. PPT could not withdraw the
LOI once it had been provided, or at any rate once CACIB had indicated that it
was accepting it, which it did on 22 April 2020 by its Advice for Receipt of
Documents informing Zenrock that PPT’s documents had been received and
that all the terms and conditions of the letter of credit had been met for payment.
Similarly, CACIB could not choose whether to pay the credit, subject to a
possible defence of fraud or other arguments (which have failed) once the
stipulated documents had been provided. As confirmed by Chitty on Contracts
vol I (H G Beale gen ed) (Sweet & Maxwell, 34th Ed, 2021) (at para 4-108), an
irrevocable letter of credit, despite the absence of any counter-promise by the
beneficiary to the bank, is not itself a unilateral contract, because it is regarded
as being binding as soon as it is communicated to the seller, ie, before the seller
has even done any act of acceptance. The LOI itself provided that it remained
valid (ie, that it could not be withdrawn) until presentation of the bills of lading
or for one year after the bill of lading date (see [33] above).
54 None of these arrangements fits comfortably with the doctrine of a

unilateral contract, such as the traditional examples of a promise to pay £100 to
someone who walks from London to York, or an offer made to the world at
large such as was found in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
(CA). But they reflect and fit perfectly with the now well-established
understanding of a letter of credit as a unilateral and irrevocable contract: see
paragraph 18 above. It follows that the LOI has to be construed as a prima facie
effective contract, subject of course to the terms stated therein.
55 The next question, then, is the interpretation of the words “[i]n

consideration of your making payment of the full invoiced price … for the
shipment at the due date for payment under the terms of the above contract”.
29
Is payment “at the due date” a condition precedent? What if payment is made
an hour late, due to some administrative error? What if it is made early and so
not “at” the due date but rather, “by” the due date? The Judge, who considered
it necessary, even if apparently uncommercial, to be strict, nevertheless
construed “at” as “by” (see Judgment at [161]), even though that does not fit all
that easily with the words “making payment … at the due date”. However, we
see no need to construe the reference to “at the due date for payment” as a strict
condition, as distinct from a description of the obligation and an innominate
term. In this connection, we refer to what was said by the Court of Appeal of
England and Wales as to an obligation of timely payment not being a condition
making time of the essence, even where emphasised by a termination clause:
see Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2016]
EWCA Civ 982 at [39(iv)]. In context, CACIB’s obligation to pay on 5 June
2020 was already to be found in the letter of credit, where the obligation was
not a condition. It therefore seems strange to construe the equivalent obligation
in the LOI as a condition. If it be said that the obligation of payment referred to
in the LOI was the obligation to pay under the sale contract, then that obligation
was not a condition either. Eventually, CACIB paid on the letter of credit, and
paid interest in remedy of the breach of late payment.
56 A question arises as to whether this analysis is in any way disturbed

because the LOI refers to payment of the price of the Zenrock-PPT sale contract,
rather than to payment under the letter of credit. For instance, if CACIB’s
consideration was to pay under the sale contract, to which CACIB was not a
party, unlike its letter of credit, might it be said that the LOI was a true unilateral
contract because the background did not involve CACIB as being already
obliged to pay under that contract? We do not consider that is so. As a matter of
history, the language concerning a letter of indemnity had been brought into the
30
letter of credit by inserting into it the already existing terms of the sale contract’s
letter of indemnity clause, with its repeated references to the sale contract. That
was not perhaps appropriate. Even so, the LOI does not in terms say that the
payment is to be made under the sale contract as distinct from “at the due date
for payment under the terms of the above contract”. As things stood, that was
the date for payment under the letter of credit. Payment of the letter of credit at
its due date would therefore amount to payment of the stipulated price at the due
date for payment under the terms of the sale contract. As such, we are of the
view that the above analysis is not faulted by this additional consideration.
57 That leads on to the further question of whether the Interim Injunction

obtained by CACIB against payment of the letter of credit amount had the effect
of extending time for payment, so that, as CACIB submits, there was in any
event no failure to pay “at the due date”. There is also a further question of
whether the reference to the due date for payment under the sale contract meant
that the Interim Injunction had no effect on the LOI, as the Judge concluded and
PPT submits anew on appeal. CACIB could have protected itself by making
timely payment into court or otherwise freezing the proceeds of payment by
court order pending the adjudication of the dispute. This has also been the
conventional way of dealing with such letter of credit disputes. In our judgment,
the Judge was right about this. The due date under the terms of the sale contract
could not be affected by the court’s order without making Zenrock a party to
the proceedings, which did not occur. As it was, even the due date for payment
under the letter of credit was not changed, for interest was paid for late payment.
58 In sum, we would therefore answer this first question by concluding that

the LOI was effective, and that CACIB, although in breach of the LOI by reason
of late payment, was not defeated by any condition which made time of the
31
essence. Our conclusion avoids us having to give to these arrangements an

uncommercial effect.
Issue 2: Was there a breach of the Warranty?
59 The Judge was of the view that there was no breach of the Warranty of
marketable title, because he considered that title had passed in the ordinary way
on shipment and that the expression “marketable title” added nothing to the
words “free and clear of any lien or encumbrance” (Judgment at [179]).
60 In our judgment, however, the words “marketable title” have to be given

their own effect, and existing jurisprudence explains that effect as a title that
may at all times and under all circumstances be forced on an unwilling buyer,
which is contrasted with a title which will expose the buyer to “litigation or
hazard”: see Barclays Bank PLC v Weeks Legg & Dean (A firm) [1999] QB 309
(“Weeks Legg”) (at 325), citing Pyrke v Waddingham (1852) 10 Hare 1 at 8.
61 CACIB submits that the Warranty was broken both because: (a) Zenrock
always intended title to pass to TOTSA under a genuine sale and not to
Shandong on the round-tripping chain under a fraudulent sale; and (b) PPT’s
title was not free from litigation or hazard.
62 We reject CACIB’s first submission. Circles within chains of contracts

are not unknown. Although the round-tripping chain was inserted into an
existing chain, the result was ultimately a longer chain. Title passed on
shipment, by which time that longer chain had been constructed. Title therefore
passed on shipment down that longer chain. CACIB, on the other hand, seeks
to present the matter as two entirely separate chains, with title passing down the
“first” chain from SOCAR to Zenrock and then directly to TOTSA (first in the
32
sense that the contracts in that chain were concluded by 30 March 2020) rather
than down the later “second” chain involving Shandong and PPT and then back
to Zenrock. However, until shipment the goods were unappropriated, and title
did not pass until shipment, by which time the two chains had become one, with
the fraudulent round-tripping inserted into what ultimately became a longer
chain.
63 But was that title “marketable”? The Judge asserted that “[t]he title was
marketable in as much as ownership could and did pass at the vessel’s flange at
the loadport” (Judgment at [170]). He then went on immediately to consider
whether that title was “free and clear of any lien or encumbrance”. He concluded
that it was, because the crystallisation of any floating charge was unknown to
the buyer (Judgment at [175]). But in the course of considering that question,
he reverted, hypothetically, to the question whether a court would enforce the
chain despite a lien or charge. He reasoned that that question was concluded in
the case of sale of goods (distinguishing sale of real property, the subject-matter
of Week Leggs) by s 12(2) of the Sale of Goods Act 1979 (c 54) (UK) (“Sale of
Goods Act”), which implies a term that “the goods are free and will remain free
until the time when the property is to pass from any charge or encumbrance not
disclosed or made known to the buyer before the contract was made”, a term
which s 61(1) of the same Act makes clear is a warranty, ie, a term sounding
only in damages. In other words, even if there had been a breach of the warranty
that the goods were “free and clear of any lien or encumbrance”, the goods could
be forced on an unwilling buyer in the sense that the buyer could not reject the
goods but would be limited to damages. Therefore, he concluded that the
warranty of “marketable title” added nothing to the warranty that the goods were
free and clear of any lien or encumbrance (Judgment at [164]–[166] and [171]–
[172]).
33
64 However, we are not persuaded by that reasoning, which PPT seeks to

uphold on this appeal. First of all, the fact that title passed does not mean that it
was a “marketable” title. Second, the fact that breach of a warranty of
marketable title may sound only in damages does not mean that it is not a breach.
Third, we are not concerned with the term “free and clear of any lien or
encumbrance”, but with the warranty of marketable title, about which the Sale
of Goods Act says nothing. Fourth, the implied term in s 12 of the Sale of Goods
Act is a term implied in a contract for the sale of goods, whereas we are
concerned with an express term in a letter of indemnity given in the absence of
a bill of lading, a document of title. It follows that the LOI Warranty is not a
“warranty” of the Sale of Goods Act variety, breach of which is confined “at all
times, and under all circumstances” to a remedy in damages. Fifth, we do not
understand the jurisprudence, which counterpoints the expressions “a title
which exposes a purchaser to litigation or hazard” and “a title which the court
will force upon an unwilling purchaser”, to mean that a title which exposes a
purchaser to litigation or hazard and thus is to be regarded as prima facie not
marketable will be forced on an unwilling purchaser because breach of the
promise of a marketable title might sound only in damages, with the
consequence that the title has to be regarded as marketable after all. Otherwise,
the breach of warranty would be made to disappear, even though there is plainly
a difference between title and marketable title. A title subject to litigation and
hazard may in due course be vindicated as a good title, but only after actual
litigation and hazard.
65 We therefore proceed to consider whether PPT’s title was marketable.

In our judgment that must depend on the true facts, not on the facts as may or
may not have been known at the time of title passing. The true facts are that
Zenrock was a fraudster (which in any event Zenrock of course knew), and that
34
by reason of its fraud, it had crystallised the inconsistent floating charges which
it had given to CACIB and ING respectively. PPT obtained its title from
Shandong and Shandong obtained its title from Zenrock. But the title held by
Shandong and a fortiori the title held by PPT in turn was of uncertain value in
circumstances where inconsistent charges had been granted over the same
goods, the floating charges had therefore been crystallised, Zenrock was not a
seller acting in the ordinary course of business and PPT was not a bona fide
purchaser for value. The Judge accepted that the floating charges had
crystallised “on 31 March 2020, or at the latest on 3 April 2020 when the Letter
of Credit was issued for the finance of the Cargo” (Judgment at [175]), ie, before
shipment on 6 April 2020. He also accepted that, although a seller may prima
facie have had apparent authority to enter into agreements for the sale of goods
in the ordinary course of business such that a bona fide purchaser for value
without notice of a charge would take free of it, neither Shandong nor PPT were
bona fide purchasers for value, since value entails actual payment and no
payment was made by Shandong or PPT until 16 April 2020, whereas the
question in issue related to title as of shipment on 6 April 2020.
66 Even if PPT was acquitted of actual complicity in Zenrock’s fraud, the

Judge might have said that Zenrock was plainly not acting in the ordinary course
of business in its fraudulent endeavours, and that PPT was hardly a bona fide
purchaser in the light of his general findings. These general findings included
the Judge’s determination that PPT was aware of the round-tripping and of
Zenrock’s position as both seller and buyer (Judgment at [50] and [67]). The
Judge also found that it should have been obvious that there was a round-
tripping chain which had to be constituted in such a way that Zenrock did not
appear as the immediate seller to, and the immediate purchaser from, any one
entity and so that the structure of the financing arrangements between the parties
35
should not reveal to any individual financing bank the presence of Zenrock in
more than one place in the chain (Judgment at [67]–[74]). As it was, CACIB
never suggested that PPT had actual knowledge of the fraud (Judgment at [28]).
67 In our view, the attempts at trial on the part of PPT’s witnesses to deny
any knowledge of such round-tripping were unbecoming and redolent of PPT’s
lack of good faith. Though the Judge eventually accepted that PPT did not know
that the round-tripping prices were well above market price (Judgment at [113]),
he described a PPT witness as evasive on the subject of market prices (Judgment
at [44]). The Judge also opined that the evidence which the PPT witnesses gave
was “not credible”, as they sought to deny knowledge of Zenrock’s endeavour
to hide the round-tripping nature of the chain from CACIB (Judgment at [64]–
[65]). Ultimately, the Judge concluded that although PPT could not be said to
be a participant in Zenrock’s fraud, PPT could hardly be described as an
innocent bystander (Judgment at [115]). We agree with the Judge’s finding on
this point. In our view, there are well-founded concerns about the marketability
of the title held by PPT from these circumstances alone.
68 Nevertheless, on the separate question of whether the title transferred

was “free and clear of any lien or encumbrance”, the Judge was persuaded, in
the absence of any decided jurisprudence, that “a purchaser under a transaction
concluded after crystallisation of the floating charge but before receiving notice
of that crystallisation takes free from the floating charge”, by analogy with the
doctrine of the apparent authority of a seller acting in the ordinary course of
business (Judgment at [176]). In this respect, the Judge cited Goode and Gullifer
on Legal Problems of Credit and Security (Sweet & Maxwell, 6th Ed, 2017)
(at paras 4-55, 5-02 and 5-53). In the light of our decision as to marketable title,
this further area of dispute may not matter. However, we would briefly observe
36
that: (a) the failure of Zenrock to have acted in the ordinary course of business
remains; (b) PPT’s failure to be a bona fide purchaser remains; (c) there was a
prima facie breach of warranty since the Cargo was not free of liens or
encumbrances once the floating charges crystallised; (d) PPT had notice of the
charges, since they were registered, although not necessarily of the terms of
those charges, if that mattered, which is uncertain; and (e) the absence of
jurisprudence directly in point emphasises the importance of the absence of a
marketable title free of hazard or litigation. However, we do not have to decide
and refrain from deciding this additional point arising out the warranty’s
language “free and clear of any lien or encumbrance”.
69 In sum, we conclude under this issue that there was a breach of the
Warranty in that PPT lacked a marketable title.
Issue 3: If there was a breach of the Warranty, what damages were

incurred?
70 The Judge said nothing on this issue. He did not have to, since this whole
part of his judgment was obiter, and he had found that the Warranty was not
breached. In any event, no separate case on damages had been pleaded by
CACIB other than by reference to the quantum claimed under the indemnity
given for failure to supply bills of lading. However, on appeal, CACIB
presented an alternative claim: that CACIB should be put in the same position
as it would have been in if either “the warranties had been true” or the original
bills had been presented.
71 As to the latter of those alternatives, we will deal with that under the
heading “Issue 4: What is the quantum of the loss under the Indemnity?” below,
37
because it is identical to the position there. Under this issue, we will deal solely
with the first alternative, which is a new argument on appeal.
72 PPT opposes CACIB’s alternative claim, on the basis that it was not
pleaded and is a new argument on appeal. It also opposes it on the ground that
breach of the Warranty did not involve any loss of the goods, only a defective
title. In any event, PPT’s position is that it did not follow from the counterfactual
of an unprejudiced title that there would have been no fraud.
73 In our judgment, the fact that the alternative counterfactual that there
would have been no fraud was not pleaded does not serve to eliminate the point,
since it is entirely one of law. CACIB’s argument on appeal is that in the absence
of the breach, which was founded on Zenrock’s fraud creating a defect in the
marketability of the title, there would simply have been no fraud. If the title had
been marketable, that could only be because the reasons which made it
unmarketable, namely Zenrock’s fraud, would not have occurred. We are of the
view that this is a valid submission, and one that we should allow.
74 In its written case, CACIB claimed as its loss the difference between the
sum paid under the letter of credit, US$23,662,732.50, and the recovery it made
in the interpleader proceedings totalling US$6,197,532.75, giving a net loss of
US$17,465,199.75. But in its oral submissions, CACIB claimed only the net
difference between the price payable by TOTSA to Zenrock and caught by the
interpleader proceedings, namely US$16,517,532.06, and the recovery of
US$6,197,532.75 achieved by CACIB in the settlement of those proceedings,
giving a net loss of US$10,319,470.81. We consider that CACIB’s revised
thoughts and reduction of its claim are correct. The existence of the claim
depends on the letter of credit and the LOI given pursuant to the letter of credit.
38
CACIB cannot claim under either document for loss which it would only have
avoided if it had not entered into those documents at all. What CACIB is entitled
to claim under the LOI is loss which it would have avoided if it had
unquestionable security over the receivable payable by TOTSA to which it was
entitled under the LOI, and which it would have had in the absence of fraud, in
return for making payment under the letter of credit. This is subject only to a
degree of uncertainty raised by PPT as to the amount of CACIB’s recovery in
the settlement. If any uncertainty remains, and the parties cannot eliminate it to
their own satisfaction, any outstanding dispute may be referred back to this
court.
Issue 4: What is the quantum of the loss under the Indemnity?
75 The Judge found, as a matter of causation, that there would have been
no loss to be indemnified, because if the bills of lading had been produced,
rather than replaced by the LOI, CACIB would have acted in the same way as
it had done in fact (Judgment at [193]–[202]). Namely, CACIB would have
refused to take up the documents, would have refused to pay out under the letter
of credit, would have never become the lawful holder of the bills of lading and
would therefore never have been able to exercise any of the rights of such a
holder either against the carrying vessel and her owners or against the Cargo at
its destination in China. Therefore, CACIB lost nothing by having the bills of
lading unavailable to it. Moreover, even if CACIB had taken up the bills, its
remedies would have been entirely speculative.
76 CACIB submits that the Judge ignored CACIB’s evidence, which was
that, if the bills of lading had been presented, CACIB would have taken them
up and been in a position to exercise its remedies against the shipowner and/or
the Cargo. At the very least, CACIB would have lost the chance of the value of
39
such remedies, and the Judge should have evaluated that lost chance, or this
court should do so.
77 In our judgment, however, it is impossible to go behind the Judge’s

careful findings that the position would have been no different, despite the
evidence of CACIB’s witnesses that it would have been. The Judge heard and
saw those witnesses. Moreover, if the bills had been available, CACIB would
have seen from the endorsements on those bills and understood, as Mr David
Joseph KC (“Mr Joseph KC”) acknowledged on behalf of CACIB, that a fraud
had been committed, with Zenrock selling the goods twice under different
credits. Where fraud had thus been confirmed, rather than merely suspected, it
is all the less likely that CACIB would have taken up the documents and paid
out under the letter of credit.
78 Mr Joseph KC therefore had an alternative argument, which was that the

inevitability of the discovery of fraud from the presentation of the bills meant
that there would never have been a fraud in the first place. That is to use the “no
fraud” alternative argument for the purpose of the Indemnity, as well as for the
purpose of the breach of warranty. However, in this context, the counterfactual
of no fraud does not work. We are no longer hypothesising what would have
happened if there had been no breach of warranty, but what would have
happened if the bills of lading had been presented in the situation in which the
parties found themselves when the LOI was presented instead.
79 We would therefore reject CACIB’s attack on the Judge’s findings under

this issue.
40
80 However, we note, even though it does not affect the result, that CACIB
is entitled to its quantum recovery not only as damages for breach of the
Warranty, but also by way of the Indemnity, since the Indemnity also covers
“all damages … which you may suffer … by reason of the … breach of
warranties given above” (see [33] above).
Conclusion
81 In summary, we allow CACIB’s appeals solely on the ground that PPT

had breached its Warranty under the LOI that it had marketable title at the time
that property passed and give judgment in favour of CACIB in the sum of
US$10,319,470.81, subject only to the matter raised at [74] above. We set aside
the orders made below on 30 March 2022, including the costs order in favour
of PPT. The parties shall file written submissions limited to 20 pages within
21 days hereof on:
(a) the principal amounts and periods for which interest is payable
to either party, if any, and the rate applicable thereto; and
(b) the costs to be awarded for the appeals and the trial.
Judith Prakash Jonathan Hugh Mance

Justice of the Court of Appeal International Judge
41
Bernard Rix
International Judge
David Joseph KC and Bibek Mukherjee (Essex Court Chambers)

(instructed); Nair Suresh Sukumaran and Bryan Tan
(PK Wong & Nair LLC), Tay Yu-Jin (Mayer Brown (Singapore)
Pte Ltd) for the appellant;
Michael Collett KC (Twenty Essex Chambers) (instructed);
Lee Wei Yuen Arvin, Giam Chin Toon SC, Wan Hui Ting, Monique
and Tay Ting Xun Leon (Wee Swee Teow LLP) for the respondent.
42

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IN THE COURT OF APPEAL OF THE REPUBLIC OF SINGAPORE

Civil Appeal from the Singapore International Commercial Court No 2

Crédit Agricole Corporate and

PPT Energy Trading Co. Ltd.

In the matter of SIC/S 1/2021

Crédit Agricole Corporate and

PPT Energy Trading Co. Ltd.

Civil Appeal from the Singapore International Commercial Court No 3

PPT Energy Trading Co. Ltd.

In the matter of SIC/S 2/2021

PPT Energy Trading Co. Ltd.

Crédit Agricole Corporate and

[Bills of Exchange and Other Negotiable Instruments — Letter of credit

Crédit Agricole Corporate & Investment Bank,

Court of Appeal — Civil Appeal Nos 2 and 3 of 2022

24 October 2023 Judgment reserved.

1 These appeals arise out of two cases heard by the Singapore

2 CACIB appealed against the Judge’s decision in both Suits. Although

(a) an injunction to restrain payment of any sums under the letter of

(d) if PPT was so entitled to receive payment under the letter of

4 In the course of the proceedings below, CACIB took out an ex parte

5 The trading background to Zenrock’s fraud on CACIB raises numerous

6 To obtain credit facilities from CACIB, Zenrock had previously

8 The wider trading background reveals further peculiarities. First,

9 Second, to finance its purchase from SOCAR, Zenrock had applied to

10 Third and most significantly, Zenrock’s original approach to PPT had

11 In the event, Trafigura was eventually withdrawn from this proposed

12 The reasons for these circular arrangements are unknown, though

115. In these circumstances, although PPT is hardly an

14 Remarkable as was PPT’s ignorance of even the general level of market

15 The anomalies in the overall position came relatively swiftly to

The letter of credit

18 It is hornbook law that a letter of credit issued by a bank in favour of a

19 CACIB’s letter of credit in favour of PPT was expressly subject to the

20 The established common law exception to this rule is the fraudulent

21 In United City Merchants, the House of Lords rejected the “broad

… if any of the documents presented under the credit by the

22 The English Court of Appeal, in accepting this half-way house approach,

23 Another established principle is that a bank issuing to a seller-

24 There is no support for CACIB’s submission. The references to

25 CACIB relies on another case, Rafsanjan Pistachio Producers Co-

26 CACIB further invokes the second alternative ground of decision

Fraud issue 2 – taking benefit with knowledge

28 Further, nothing in Art 4 of the UCP 600 lends support to CACIB’s

29 CACIB suggests that the principle which it invoked could be confined

31 The fundamental problem with CACIB’s case on the letter of credit is

The letter of indemnity

LETTER OF INDEMNITY (L.O.I.)

board the vessel Indigo Nova at the port of Djeno Terminal,

35 The first promise was expressly given “[i]n consideration of [CACIB]

The Judge’s reasoning

38 The Judge arrived at this conclusion by treating the LOI as a unilateral

Whilst this [late payment, even one day late due to an

In the result, I conclude that, in the absence of payment by

40 The Judge thereafter went on to consider in obiter whether, in any event,

41 As to the Warranty, which he treated as constituting two separate

The position is therefore that, as at 6 April 2020, Shandong and

notice of crystallisation. In such circumstances, PPT’s warranty

42 The Judge proceeded to consider the Indemnity provided by the LOI