Zenrock entered into an FOB sale contract with the defendant China Aviation Oil (CAO), which was on back-to-back terms, since CAO bought the same cargo from Shandong Energy International (Singapore) Pte Ltd (SEIS) under a contract of the same date. The second plaintiff, Banque de Commerce et de Placements SA (BCP), agreed to finance this purchase by issuing a letter of credit (LC) for US$20.5 million on the basis of Zenrock’s representation that the cargo would be onsold to PetroChina International (East China) Co Ltd, with the bank’s exposure secured under an assignment of receivables due to Zenrock under Zenrock’s sale of the cargo to PetroChina. Upon CAO’s presentation of its LOI and invoice to the confirming bank UBS, CAO received payment from UBS under the LC. When BCP requested reimbursement from PetroChina, PetroChina informed BCP on 29 April 2020 that the sale contract between Zenrock and PetroChina was cancelled pursuant to a tripartite agreement. Zenrock was then placed under judicial management and liquidation from May 2020. BCP commenced proceedings to claim from CAO for the sum disbursed under the LC, and alleged that the CAO-Zenrock contract was a sham and/or fraudulent transaction. This in turn triggered a series of actions against the parties down the chain (namely the third party SEIS and the fourth party Golden Base Energy).

BCP’s claim against CAO was premised on the following causes of action: (1) CAO being entitled to recover the payments made under the “fraud exception” for LCs; (2) the tort of deceit; (3) negligent misrepresentation in that CAO owed BCP a duty of care to