Singapore Court of Appeal Judgment in respect of a negligence action against auditors: Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33

Singapore Court of Appeal Judgment in respect of a negligence action against auditors: Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33

The recent decision of Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33 by a 5-judge coram affirmed the importance of having regard to the fundamental principles underpinning the cause of action in negligence under Singapore law.

Background

This is the latest decision arising from the financial collapse of Hin Leong Trading (Pte) Ltd ("Hin Leong"), an oil trading company owned by Mr Lim Oon Kuin and his two children. In April 2020, due to its financial difficulties, Hin Leong filed an application in court for an interim moratorium. In that application, which was subsequently withdrawn, Mr Lim admitted on affidavit that there were misstatements in Hin Leong's financial statements.  

Eventually, Hin Leong was placed in compulsory liquidation and the liquidators ascertained that there were material misstatements in the financial statements of Hin Leong for the financial years 2014 to 2019, which falsely inflated the value of Hin Leong's assets.  Deloitte & Touche LLP (“Deloitte”) was Hin Leong’s auditor during the relevant period.

The Proceedings

Hin Leong, acting through its liquidators, commenced civil proceedings against Deloitte, alleging that in its audit Deloitte had failed to exercise reasonable care and skill (the “Negligence Claim”). Hin Leong sought, amongst other things, compensation for trading losses of US$2.6 billion incurred between November 2015 and mid-April 2020 (the “Trading Losses”). In the proceedings, Hin Leong applied to introduce further claims, including a claim that Deloitte had a duty to report any fraud / irregularity likely to result in material loss to Hin Leong to government authorities / third parties (the “Reporting Duty Claim”).  

Deloitte resisted the introduction of the Reporting Duty Claim and applied to strike out the Negligence Claim.  In the court below, the judge permitted the introduction of the Reporting Duty Claim and permission to appeal against this was not granted. The judge in the court below also declined to strike out the Negligence Claim, and it is this decision which was the subject of the appeal to the Singapore Court of Appeal.

The Issues and Arguments

In respect of the Negligence Claim, Deloitte’s main argument was that it should be struck out because, as the Lim family were sole directors and shareholders of Hin Leong and were aware of the actual state of affairs, they and Hin Leong had not relied on the audited financial statements containing the misstatements. In response, Hin Leong argued that, due to the insolvency of Hin Leong at the time of the audits, Deloitte had, in addition to a duty to provide shareholders with accurate information, a duty also to have regard to the interests of the creditors of Hin Leong (the "Creditor Duty").  

As for the Trading Losses, Deloitte submitted that losses arising from trading activities that were legitimate but loss-making were, amongst other things, outside of its scope of its duty (based on a principle derived from the House of Lords decision in South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 ("SAAMCo")). Against this, Hin Leong argued that it was part of Deloitte's duty to protect Hin Leong from the risks of there being inaccuracies in its audited accounts and that the misstatements in the audited accounts gave rise to the risk of the continuation of loss-making trading activities by Hin Leong.

Basic elements of a negligence claim

In its judgment, the Court of Appeal took the opportunity to affirm the fundamental elements of a cause of action in negligence under Singapore law.

These elements, in summary, are as follows:

1. The damage suffered must be of a type that is actionable.

• "In this regard, “damage” is generally understood as “an abstract concept of being worse off, physically or economically, so that compensation is an appropriate remedy”" (Judgment at [45], quoting Rothwell v Chemical & Insulating Co Ltd [2008] 1 AC 281).

2. Existence of a duty of care owed by the defendant to the claimant.

• In Singapore, the existence of such a duty is determined by the framework set out in the Singapore Court of Appeal decision of Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 (Judgment at [47]).
• The 'duty of care' means "the duty to exercise reasonable skill and care so that injury or loss is not caused to the claimant, and not a duty to do any specific act or acts" (Judgment at [50]).

3. Breach of duty of care.

• This is a question of fact (Judgment at [50] and [77]).
• The "ultimate question that has to be decided is not whether the defendant failed to do any specific thing but whether the failure to do a certain thing constituted a failure to act with due skill and care" (Judgment at [50])

4. The damage suffered was factually caused by the breach.  

• Ordinarily, apart from certain exceptional circumstances, this entails the application of the 'but for' test, i.e. "but for the defendant's wrongdoing, would the claimant have suffered the damage that he complains of?" (Judgment at [58]).

5. The damage falls within the limits of the claimant's legal responsibility.

• Broadly, this involves two main considerations:
  • The extent to which, in circumstances where there is more than one cause of the damage, responsibility for the damage should be attributed to the defendant (Judgment at [59(a)]).
  • The foreseeability of the damage, i.e. whether the loss is too remote (Judgment at [67]). Where the claimant owes duties of care concurrently in tort and contract, the narrower remoteness rules pertaining to contract, as set out in the case of Hadley v Baxendale (1854) 9 Exch 341, would apply (Judgment at [68]).  In that regard, the "rule in Hadley v Baxendale, in brief, contemplates that a defendant should be liable for such damage that he is taken to have assumed responsibility for based on it having been in his contemplation at the time of contracting" (Judgment at [68]).

Even if the above elements are satisfied, there may be operative defences (e.g. illegality or contributory negligence) (Judgment at [44]).  

The Court explained that its identification of the individual elements of a negligence claim was intended to foster clarity as to the true nature of the issue in question (Judgment at [70]).

The Court's Decision

The appeal proceeded as a summary determination of two questions: (a) whether Deloitte's duty of care included the Creditor Duty, and (b) whether the Trading Losses are recoverable.

Creditor Duty issue

Regarding the Creditor Duty issue, the Court of Appeal considered it to be academic (Judgment at [91]) because, amongst other things, the Creditor Duty, if any, "really does not have a separate existence outside of the Negligence Claim and the framework for negligence" (Judgment at [92]). This meant that, even if a finding was made that there was no Creditor Duty, the pleadings in respect of the Negligence Claim would not be struck out as they would remain necessary for the Reporting Duty Claim (which was part of the Negligence Claim) (Judgment at [99]).

The Court also made some observations in the context of the Creditor Duty issue regarding Hin Leong's attempt to draw an analogy between directors' duties and auditors' duties. In Foo Kian Beng v OP3 International Pte Ltd [2024] 1 SLR 361, the Singapore Court of Appeal had in summary held that a director, in discharging his duty to act in the best interests of the company, had to consider the interest of creditors when the company is insolvent or close to insolvency. In the Judgment, the Court was of the view that, because an auditor plays a different role from a director, and given that an auditor generally is not involved in making decisions for the company, the proposition that "an auditor like Deloitte has a duty to "have regard to the interests of creditors" is unintelligible" (Judgment at [114]). The Court considered that, for any Creditor Duty to be meaningful, it would have to be related to a certain act or omission (Judgment at [115]).

More generally, the Court considered that the Creditor Duty issue, rather than being a 'duty of care' question, was essentially a question of whether Deloitte had breached its duty of care to Hin Leong – which, being a question of fact, was held not appropriate for summary determination (Judgment at [117]).

Trading Losses issue

On this issue, the Court of Appeal observed that whilst there was "a steady body of authority that supports its position that a company’s losses from continued trading are typically not recoverable from a negligent auditor, there is little consistency in terms of the reasoning to this conclusion" (Judgment at [120]).

One rationale relied upon in some court decisions is that such losses cannot be said to be caused by the auditor's negligence, based on a 'commonsense' approach to causation (Judgment at [125] and [127]). On the other hand, some decisions, based on the principle derived from the SAAMCo case, adopt "an approach that relies on the notion of the scope of a duty of care and rules out recovery of trading losses on the basis that they fall outside the scope of the auditor’s duty" (Judgment at [121(b)].

For the purposes of this case note, it suffices to note that the Court of Appeal considered both approaches outlined above to be unsatisfactory. Instead, the Court considered that "the Trading Losses Question raises an issue of remoteness of damage: are [Hin Leong's] Trading Losses too remote to Deloitte's breach of duty so as to be irrecoverable?" (Judgment at [153])

In this case, as Deloitte's duty of care arises in both tort and contract, the Hadley v Baxendale remoteness test for contract applied. In that regard, the Court of Appeal held that the Trading Losses were too remote because, amongst other things, Deloitte had not been involved in the trading activities of Hin Leong (Judgment at [155]) and an auditor who does no more than undertake a statutory audit cannot be said to have assumed liability for losses arising from the company's trading activities, given that the occurrence of such losses "depends on movements in the market and the decisions of the company's management which the auditor has no control over or involvement in" (Judgment at [155]). Given the nature of the services which Hin Leong had engaged Deloitte to undertake, the Court considered it unlikely that Deloitte would have contemplated being liable for the Trading Losses if it was negligent, since those services did not have anything to do with Hin Leong's trading activities (Judgment at [157]).

To conclude, the Court held that the Trading Losses were not recoverable as they were too remote. Hin Leong's pleadings relating to the claim for Trading Losses were, therefore, ordered to be struck out, leaving the following two remaining heads of loss claimed by Hin Leong: (a) dividends allegedly wrongfully declared for financial years 2017 and 2018 (totalling US$90m); and (b) Deloitte's audit engagement fees from financial years 2015 to 2019 (totalling $612,000).

Brief concluding thoughts

This is an important decision of the Singapore Court of Appeal, in which the Court provided conceptual clarity regarding the essential elements underpinning a cause of action in negligence under Singapore law.

As each element gives rise to specific issues, the Court underscored the importance of parties not conflating the different elements when framing their arguments.