The US$2.6 Billion Head of Loss That Did Not Survive

Hin Leong Trading collapsed in April 2020 amid admitted fraud by its controllers. Its liquidators sued Deloitte, its auditor for many years, alleging a negligent failure to detect and report material misstatements across the financial years ended 2014 to 2019. The largest head of loss was US$2.6 billion in trading losses incurred between November 2015 and April 2020, on the theory that proper auditing would have put the company into liquidation earlier and stopped the bleeding.

The Court of Appeal struck that head of loss out, and only that head of loss. This was an appeal from a striking-out application, argued on the footing that every fact the liquidators pleaded is true. Nothing has been found against Deloitte. The negligence claim continues, as do the claims for US$90 million in wrongfully declared dividends and for the audit fees themselves. The court also declined to answer the much-publicised question whether an auditor owes a duty to have regard to creditors’ interests, holding it academic on these pleadings.

Relevant to the scope of an auditor’s responsibility for its client’s trading results, the Singapore Court of Appeal decided in Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd by Ang Cheng Hock JCA:

Deloitte did not have any involvement in HLT’s trading activities. It did not have any sight over what trading strategies HLT employed or give any input to the Lim Family as to whether certain trading methodologies were advantageous or otherwise. This gaping hole in Deloitte’s knowledge makes it fanciful for HLT to suggest that it could have been in Deloitte’s reasonable contemplation that it had essentially signed up to insure HLT’s trading fortunes. 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.

Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33, [155].

A second reason was statutory, and it is the one advisers should note. Liability for wrongful and fraudulent trading under the Singapore Companies Act attaches only on actual knowledge. The court held that an auditor would not reasonably have assumed responsibility for trading losses on a lower knowledge threshold than the one Parliament had fixed. The statutory floor set the contractual expectation.

Singapore Has Removed the Separate Scope of Duty Step

The doctrinal move is the part that will outlive the facts. English law treats the scope of the adviser’s duty as a distinct question, confirmed by the UK Supreme Court in Manchester Building Society v Grant Thornton UK LLP. The Singapore Court of Appeal rejected that structure. It held that the principle ‘has nothing to do with causation’, and that Lord Hoffmann’s well-known mountaineer example does not disprove causation at all but identifies the scope of risk the adviser assumed.

Relevant to where the limit on an adviser’s liability now sits, the Singapore Court of Appeal decided in Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd by Ang Cheng Hock JCA:

In this regard, while a test of objective probability may be a rough approximation of whether loss is too remote, it is not itself the true test of remoteness. There is no difficulty in subsuming the SAAMCo principle into the Hadley v Baxendale test if this is borne in mind.

Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33, [152].

The practical consequence is that the limit is now a contract question. It is answered by asking what was within the adviser’s reasonable contemplation at the time of engagement, on the ordinary first and second limbs of Hadley v Baxendale. The court expressly declined to define the duty of care by reference to the specific damage, because that folds remoteness into duty and is inconsistent with the Spandeck framework, which remains Singapore’s test for the existence of a duty. It also reserved the position where there is no contract at all, or where the relationship is merely akin to contract. That gap is live for tort-only claims against advisers.

Where Australia Puts the Same Limit: Section 5D(1)(b)

Australia does not need to choose a doctrinal home for the limit, because Parliament chose one. Since the 2002 civil liability reforms, causation has been split by statute into a factual question and a normative one, and the limit lives in the normative limb.

(1) A determination that negligence caused particular harm comprises the following elements—
(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and
(b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused (scope of liability).

Civil Liability Act 2002 (NSW) s 5D(1). The ACT equivalent is Civil Law (Wrongs) Act 2002 (ACT) s 45(1) and (3).

That provision is the Australian answer to the same problem. Section 5D(1)(a) is entirely factual. Section 5D(1)(b) is entirely normative, and s 5D(4) requires the court to consider and explain why responsibility should or should not be imposed. The label differs from Singapore’s, but the work is identical: filtering out losses that are factually caused yet should not be compensated.

Australia Absorbed the SAAMCo Principle Rather Than Rejecting It

It is often assumed that Australia turned its back on the English scope of duty cases. It did not. The High Court has placed Lord Hoffmann’s risk principle inside the statutory scope of liability limb, and adopted his mountaineer example while doing so.

Relevant to the content of the normative limb, the High Court of Australia decided in Wallace v Kam, in a unanimous joint judgment of French CJ, Crennan, Kiefel, Gageler and Keane JJ:

A limiting principle of the common law is that the scope of liability in negligence normally does not extend beyond liability for the occurrence of such harm the risk of which it was the duty of the negligent party to exercise reasonable care and skill to avoid. Thus, liability for breach of a duty to exercise reasonable care and skill to avoid foreseeable harm does not extend beyond harm that was foreseeable at the time of breach.

Wallace v Kam (2013) 250 CLR 375, [24] (French CJ, Crennan, Kiefel, Gageler and Keane JJ).

The High Court footnoted the English authority and its own earlier decision for that principle. It cited Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd at 213 to 214, and Kenny & Good Pty Ltd v MGICA (1992) Ltd. Wallace v Kam remains current and was applied by the Full Federal Court as recently as Hassan v Minister for Home Affairs in April 2025.

Kenny & Good declined Lord Hoffmann’s route, not his principle. In that case a valuer negligently overvalued a property and the loss was deepened by a falling market. The High Court unanimously held the valuer liable for the whole loss, but by three different paths. Gaudron J rejected the English approach to both the identification of the duty and the identification of the loss as contrary to the common sense approach required by March v Stramare, while accepting that an adviser is not liable for loss that would have been suffered even if the advice had been correct.

McHugh J took the route Singapore has now taken. He held that the answer lay in applying contract damages principles: the adviser is liable only for losses flowing naturally from the breach or within reasonable contemplation, and as a general rule those do not include the consequences of market declines. He reached that conclusion, in his own words, for reasons which of course differ from those given by Lord Hoffmann. Gummow J accepted the analysis for the ordinary case. On the particular facts the valuer still lost, because its report had effectively warranted that the property would hold its value for three to five years, which brought the whole loss within contemplation.

That is the quiet finding in this comparison. The path the Singapore Court of Appeal adopted in 2026, routing the limit through Hadley v Baxendale, is the path a member of the High Court of Australia mapped in 1999.

Australia’s Auditor Case Is Alexander v Cambridge Credit, and Singapore Has Dismantled Its Reasoning

On the specific question of an auditor’s liability for a company’s continued trading losses, the leading Australian authority is a 1987 decision of the New South Wales Court of Appeal. In Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 the auditor negligently failed to provide for doubtful investments, the company traded on for three years, and it then claimed the deterioration in its net asset position. The majority, Mahoney JA and McHugh JA, held the loss was not caused by the auditor’s negligence. Allowing a company to remain in existence exposed it to the dangers of existing, which was not the same as causing the losses. McHugh JA rested the conclusion on practical common sense. The English Court of Appeal followed him in Galoo Ltd v Bright Grahame Murray.

The outcome in Alexander is the same as the outcome in Hin Leong. The reasoning did not survive. The Singapore Court of Appeal gave three reasons for rejecting the common sense causation route: it is analytically indeterminate, it conceals the real reasoning, and it commits a category error. On the first, the court noted that in Alexander itself the dissenting judge, Glass JA, thought common sense pointed the other way.

Relevant to the reasoning in the leading Australian auditor case, the Singapore Court of Appeal decided in Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd by Ang Cheng Hock JCA:

The final reason, which we elaborate on below, is that “common sense” causal reasoning in cases like Alexander and Galoo arguably involves a category error as it conflates a question of causation with a question of legal responsibility.

Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33, [130].

The court then used McHugh J’s own change of mind against the case he had decided. Less than five years after Alexander, sitting in the High Court in March v Stramare, McHugh J said that reliance on common sense had obscured the reality that the court was making a policy judgment about the extent of a defendant’s responsibility.

Relevant to the true nature of any rule limiting liability, McHugh J said in the High Court of Australia in March v E & M H Stramare Pty Ltd:

Whatever label is given to such a rule — “common sense principles”, “foreseeability”, “novus actus interveniens”, “effective cause”, “real and efficient cause”, “direct cause”, “proximate cause” and so on — the reality is that such a limiting rule is the product of a policy choice that legal liability is not to attach to an act or omission which is outside the scope of that rule even though the act or omission was a necessary precondition of the occurrence of damage to the plaintiff.

March v E & M H Stramare Pty Ltd (1991) 171 CLR 506, 530-531 (McHugh J).

For an Australian practitioner the position is therefore comfortable in result and exposed in reasoning. Alexander‘s outcome is orthodox and is unlikely to be disturbed. Its ratio, however, rests on a mode of reasoning that its own author abandoned, that the High Court has since said will ordinarily be of limited utility in novel cases, and that a five-member Singapore Court of Appeal has now analysed and rejected at length. A modern Australian claim against an auditor for trading losses should be run through s 5D(1)(b), with the normative reasoning stated openly, rather than through an appeal to common sense.

The Case That Helps Claimants, and Why It Did Not Help Here

There is one recent English decision holding an auditor liable for a company’s continuing losses. In AssetCo plc v Grant Thornton UK LLP the auditor failed to detect that the business was sustainable only on the strength of dishonest representations, and was held liable for losses from two loss-making contracts. The liquidators relied on it. The Singapore Court of Appeal rejected the analogy on two grounds, and the distinction is the most useful part of the judgment for anyone assessing exposure.

Relevant to when continuing losses do fall within an auditor’s responsibility, the Singapore Court of Appeal decided in Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd by Ang Cheng Hock JCA:

To put the point another way, AssetCo involved the company having a particular wound which it continued to bleed from in subsequent years due to the auditors failing to identify the wound.

Deloitte & Touche LLP v Hin Leong Trading (Pte) Ltd (in compulsory liquidation) [2026] SGCA 33, [167].

The test that emerges is whether the undetected problem is a continuing source of loss. Where the negligence leaves an identifiable, ongoing haemorrhage such as a loss-making contract that would have been terminated, the resulting losses can fall within the adviser’s responsibility. Where the losses are discrete year-on-year trading outcomes driven by market movements and management decisions, they do not. The court also held that the liquidators had not pleaded that the trading was likely to generate losses, only that it was capable of doing so, and that the distinction defeated the analogy on the pleadings alone.

What This Changes in Your Engagement Letters and Your Pleadings

The engagement letter now does more work in Singapore than it did. If the limit is fixed by what was within the adviser’s reasonable contemplation at the time of contracting, then the recitals describing the purpose and scope of the engagement are the primary evidence of that contemplation. Kenny & Good shows the cost of getting this wrong from the adviser’s side: a sentence recommending the property as suitable security for a term of three to five years converted a point-in-time valuation into something close to a warranty of future value.

Pleading practice diverges between the two jurisdictions. In Singapore, a defendant adviser now pleads remoteness, and a claimant must plead the facts that put the loss within contemplation. In New South Wales and the ACT, the same argument is a s 5D(1)(b) scope of liability point supported by reasons of legal policy. Running a Singapore claim on Australian statutory language, or an Australian claim on Hadley v Baxendale alone, will misfire.

The strike-out risk for large consequential heads of loss has increased. Hin Leong confirms that a court will determine this limit summarily where the facts can be assumed in the claimant’s favour. A claimant who cannot articulate why the specific loss was within the adviser’s contemplation should expect that head of loss to be tested early rather than at trial.

Two Australian features of these claims have no Singapore counterpart. A claim against an auditor for economic loss caused by a failure to take reasonable care is ordinarily an apportionable claim under Australian proportionate liability legislation, so a negligent auditor answers only for the share of responsibility a court attributes to it, even where the other concurrent wrongdoers were the fraudsters themselves: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613. Professional standards legislation can also cap an Australian auditor’s liability. In Singapore, a loss that survives the remoteness limit remains recoverable from the auditor in full.

Your Review Checklist

• Identify the governing law of each professional engagement. The limit on your adviser’s exposure is now located differently under Singapore law and Australian law.
• Read the purpose and scope recitals in your engagement letters as the primary evidence of what the adviser contemplated, because that is what a Singapore court will now do.
• Check whether any engagement document strays from describing a service into warranting a future state of affairs, which is what defeated the valuer in Kenny & Good.
• For claims against advisers, separate the discrete losses from any continuing source of loss, and plead the continuing source specifically if there is one.
• Plead that the loss was likely, not merely possible. The distinction defeated the AssetCo analogy in Hin Leong on the pleadings alone.
• In NSW and ACT proceedings, address s 5D(1)(b) expressly and state the reasons of legal policy, rather than resting on causation language or common sense.
• Do not assume the creditor duty question is resolved. The Singapore Court of Appeal declined to answer it, so it remains open.

Disclaimer: This article is provided for general information purposes only and does not constitute legal advice. Specialised legal counsel should be sought for specific fact patterns.