The former director of a now-collapsed Singaporean fuel trading firm has successfully overturned a court ruling that had previously found him “asleep at the wheel” and liable for trade finance fraud losses worth nearly US$150mn.
Last year, the Singapore High Court ruled that Goh Jin Hian, a former executive of Inter-Pacific Petroleum (IPP) and the son of a former Singaporean prime minister, had failed to uphold his duties as a director when employees at the fuel trading firm defrauded Société Générale and Maybank.
Goh was ordered to pay compensation worth US$146mn to IPP’s liquidators, with the judge criticising the former director for allowing the trader to be used as a “vehicle of fraud”.
But on June 5, the appellate division of the Singapore High Court overturned the ruling in favour of Goh, who had been a director for eight years – up until his resignation in mid-2019.
The appeals court agreed with the earlier ruling that Goh was likely unaware that IPP’s cargo trading business – where much of the fraud took place – existed, breaching his duty of care.
But the judges found there is no evidence that Goh’s ignorance was directly responsible for losses, and the “legal burden” is on IPP to prove causation.
Judges Tay Yong Kwang, Woo Bih Li, and Kannan Ramesh criticised IPP’s lack of “specificity”.
“This is a case of a deep-seated fraud,” they wrote. “It does not follow that if Dr Goh had been aware of the cargo trading business, he would have discovered the fraud and thereby put a stop to it. This makes it all the more important for IPP to specifically plead and prove what steps would have been taken (if the Care Duty was discharged) and how that would have uncovered the fraud and averted the loss.”
Established in 2011, IPP operated as both a cargo and a bunker trader. Under its cargo business, the firm purchased fuel oil and on-sold it to buyers, including Mercuria Energy, Minerva Bunkers and Sinochem International.
However, by 2019, the existence of many of these trades was called into question and Société Générale and Maybank were left on the hook for US$90mn and US$60mn respectively, having provided trade finance lines to the firm.
Alleged customers including Mercuria, Minerva, Sinochem and Petco denied the existence of the “vast majority” of the cargo trading transactions registered by IPP, leading a judge to describe the deals as “sham transactions”.
Shen Yi Thio, joint managing partner of law firm TSMP Law Corporation, which represented Goh, says in a LinkedIn statement that the ruling is an “important decision” and that “a lot of independent directors will be extremely relieved”.
Nanthini Vijayakumar, a partner at TSMP, says a key aspect of the ruling was its assertion that a director is not a “forensics investigator or a sleuth”.
“It is not part of a director’s duty of supervision and oversight to pick up fraud unless there are tell-tale or warning signs,” she says. “The fraudsters had created a paper trail to construct a façade of legitimacy.”
The Singapore appellate court found Goh was not alerted by IPP’s auditors of any issues in 2018 and rejected claims that he disregarded red flags such as unpaid receivables worth over U$100mn from Mercuria.
Goh was also cleared of breaching his creditor duty as he had no knowledge of the fraudulent transactions. “It is clear… the Creditor Duty only applies to a director who had exercised his discretion to transact,” the judges found.
Professional services firm Deloitte was appointed as IPP’s liquidator by the Singapore courts in 2021.
