A Singapore court has struck out an attempt by the liquidators of Hin Leong to hold auditor Deloitte liable for US$2.6bn in trading losses suffered by the collapsed commodity trader.
Hin Leong imploded in 2020 after plummeting oil prices exposed a years-long trade finance fraud. The company’s liquidators filed a series of claims against Deloitte, the trader’s auditor between 2003 and 2020, alleging its auditing work was negligent and helped Hin Leong continue trading, causing further harm to creditors.
The liquidators pursued three claims for damages. The largest, for US$2.6bn in trading losses chalked up by Hin Leong between 2015 and 2020, was struck out on July 16 by Singapore’s Court of Appeal, which found the trading activity was “too remote” from Deloitte’s work as auditor. The two other damages claims are ongoing.
“It is inconceivable that an auditor who does nothing more than perform a statutory audit could be taken to have assumed liability for such losses[,] since their occurrence depends on movements in the market and the decisions of the company’s management which the auditor has no control over or involvement in,” wrote Judge Ang Cheng Hock, on behalf of the court’s five judges.
The liquidators had argued that Deloitte knew the financial statements to which it had given a clean bill of health would be passed on to banks that extended credit to Hin Leong, thereby allowing the firm “to continue trading despite being massively insolvent”.
But the court said that argument “cuts no ice” because the losses did not directly stem from the financing Hin Leong obtained, but instead from how the company put the borrowed money to use.
“The mere extension and obtaining of credit, in and of itself, did not cause HLT [Hin Leong Trading] any loss as the increase in HLT’s liabilities was matched by a corresponding increase in its assets on the other side of the balance sheet,” the ruling said.
“The fact of the matter is that, even if it was known to Deloitte that it was enabling HLT to continue trading on credit, how HLT went about trading using such credit was not within Deloitte’s knowledge.”
“There is nothing in the relationship between the parties that indicates that Deloitte would reasonably have contemplated that it was exposing itself to potential liability for HLT’s ongoing trading simply by offering its services as a statutory auditor,” the court ruled.
The court declined to address an argument by Hin Leong’s liquidators that Deloitte had a duty to the trader’s creditors, rather than just shareholders, because it is “academic” and not appropriate for a summary judgment.
Two other damages claims against Deloitte remain ongoing and were not subject to the appeal: US$90mn in dividends that the liquidators say were wrongfully declared by Hin Leong’s controlling Lim family in 2017 and 2018, and US$612,000 in audit fees earned by Deloitte, which the liquidators argue would not have been earned had the firm properly discharged its duties and Hin Leong ceased trading earlier.
PwC, Hin Leong’s liquidators, declined to comment. Deloitte did not respond to a request for comment.
Hin Leong’s foundering during the early months of the Covid-19 pandemic left several trade finance banks such as HSBC, Standard Chartered, UniCredit and UOB nursing losses and triggered a web of litigation in the city-state, some of which is ongoing.
Hin Leong founder Lim Oon Kuin was handed a 17.5-year jail term in 2024, which was reduced to 13.5 years earlier this year. He entered prison in April, local media reported.
