Not the Insurer of Commercial (Mis)Fortune: The Limits of Auditor Liability 

In Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33, the liquidators of a defunct company sought to hold Deloitte liable for the full US$2.6 billion in trading losses that Hin Leong incurred after its accounts were allegedly negligently audited. 

In its judgment, the Singapore Court of Appeal returned to first principles on causation and remoteness, and drew a firm line under just how much of a company’s commercial fortune an auditor can be made to answer for. 

Facts of the case

Hin Leong Trading (Pte) Ltd (“Hin Leong”) was a commodity trading corporation and was one of Asia’s largest oil traders until its collapse in April 2020. Management and control of the company was kept within the circle of its founder, Lim Oon Kuin (better known as OK Lim), and members of his family (collectively, the “Lim Family”).

Deloitte had been engaged as Hin Leong’s external auditor from at least 2003 until it resigned in September 2020. As part of its duties, Deloitte audited Hin Leong’s financial statements and issued unqualified opinions for each of the financial years (“FY”) ended 31 October 2014 through 31 October 2019. 

In April 2020, OK Lim had affirmed an affidavit admitting to an array of irregularities in Hin Leong’s affairs, including misstatements in Hin Leong’s financial statements that had concealed the fact that Hin Leong had been operating on a loss. 

Hin Leong was subsequently placed into compulsory liquidation and the liquidator’s investigation showed fraud and irregularities in Hin Leong’s financial affairs since 2010, none of which were reflected in its audited financial statements or highlighted by Deloitte in the audit opinions that had been issued. In fact, Hin Leong’s audited financial statements between FY2014 and FY2019 had contained misstatements, including fictitious profits and overstatements of accounts receivable and inventory. This meant that the value of Hin Leong’s assets had been inflated and the audited financial statements had not presented a true and fair view of their financial position. The liquidators estimated that Hin Leong may have been insolvent as early as 2012.

The claim

Hin Leong’s liquidators brought proceedings against Deloitte, claiming damages for professional negligence in both contract and tort, with the most significant head of damage amounting to USD 2.6 Billion for trading losses incurred between November 2015 and April 2020. 

The nub of the liquidators’ case was that Deloitte failed to exercise reasonable care and skill in the conduct of their audits. As a result, Deloitte failed to detect material misstatements in Hin Leong’s financial statements, concealing the company’s insolvency over a period of years.

Deloitte applied to strike out the liquidators’ claim for trading losses, arguing that even if Deloitte had found misstatements in Hin Leong’s financial affairs, it would have no causal link to the loss suffered as the perpetrators of the fraud were the directors who had management control over Hin Leong’s activities (i.e. the Lim Family). 

Both the Assistant Registrar at first instance and, subsequently, the High Court Judge on appeal, dismissed the striking out application. Deloitte subsequently obtained permission to appeal to the Court of Appeal.

The Court of Appeal Decision 

One of the key issues on appeal was whether Hin Leong’s trading losses were recoverable from Deloitte, assuming that Deloitte had indeed been negligent in the conduct of its audits.

The Court of Appeal allowed Deloitte’s appeal in part, striking out Hin Leong’s claim for trading losses amounting to US$2.6 billion. In doing so, the Court of Appeal held that those losses were too remote to be recoverable even assuming Deloitte had breached its duty of care. Deloitte had not been involved in Hin Leong’s trading activities, and the Court of Appeal considered it “inconceivable” that an auditor who does no more than perform a statutory audit could be taken to have assumed liability for such losses, since their occurrence depended on movements in the market and on decisions of the company’s management that were entirely outside the auditor’s control. The Court of Appeal also noted that the losses arose from fresh trades entered into year on year, rather than from one continuing loss-making transaction. This made it harder still to treat the trading business as a single consequence for which the auditor should answer.

The Court of Appeal also drew support from the statutory regime for wrongful and fraudulent trading, which generally fixes liability on those with actual knowledge of, or genuine involvement in, the trading in question. The Court of Appeal observed that what Hin Leong’s action sought to do was to, through a claim in negligence, impose liability on Deloitte for trading losses based on a lower degree of knowledge than actual knowledge. 

Considering matters in the round, the Court of Appeal held that there was nothing in the relationship which indicated that Deloitte would reasonably have contemplated that it was exposing itself to potential liability for Hin Leong’s ongoing trading simply by offering its services as a statutory auditor. The trading losses were therefore too remote and irrecoverable from Deloitte even if Deloitte were to be found to have been negligent.

Conclusion

The limits of an auditor’s liability turn on the purpose of its engagement and the responsibility it can fairly be taken to have assumed. The Court of Appeal emphasised this point, stating that Deloitte could not have contemplated to insure Hin Leong’s trading fortunes. The decision gives auditors welcome clarity on where their responsibility ends and their client’s own commercial risk-taking begins. Ultimately, auditors may be required to help chart the course, but they are not responsible for every storm the company chooses to sail into.