Reed Smith In-depth

The case in question is CIMB Bank Bhd v. World Fuel Services (Singapore) Pte Ltd [2021] SGCA 19. The decision was delivered on 5 March 2021 by the Singapore Court of Appeal.

The judgment addresses issues surrounding claims by a bank under assignments and other security documents over rights in and receivables under commodities supply contracts, and overturns the Singapore High Court decision in CIMB Bank Bhd v. World Fuel Services (Singapore) Pte Ltd [2020] SGHC 117.

Auteurs: Kyri Evagora Kohe Hasan Justine Barthe-Dejean Gautam Lamba

Summary

The case arises from the bankruptcy of Panoil Petroleum Pte Ltd (Panoil). The Court of Appeal has reversed the High Court’s findings on the interaction between inconsistent and competing contract terms. Depending on which terms prevailed, either: (a) CIMB Bank Berhad (CIMB) would have valid claims by virtue of a debenture granted to it by Panoil against World Fuel Services (Singapore) Pte Ltd (WFS); or (b) WFS would have validly set off these claims.

Both the High Court and the Court of Appeal carried out a close analysis of the inconsistent and competing contract terms, and came to opposite conclusions. This goes to show the complexity in this area of the law. The Court of Appeal provided useful guidance on the analysis to be carried out by a court when applying to a particular kind of contractual matrix the principle that “the more specific document ought to prevail over a standard form document”.

This decision is relevant to commodities trading and financing, in particular, where multiple overlapping and competing contractual arrangements are a recurring issue.

The decision also considers specific issues of Singapore court procedure relative to the weight of indirect and circumstantial evidence adduced in place of available (but not adduced) direct evidence.

What happened between the parties?

In late June 2016, CIMB provided loan facilities to Panoil. Funds advanced to Panoil were purportedly secured by an all monies limited debenture over all of the goods and/or receivables relating to the goods, as well as documents representing the goods financed by CIMB (the Debenture). 

Between July and August 2017, Panoil issued 11 sales confirmations (the Sales Confirmations) and 11 related invoices (together, the Contracts) to its counterparty, WFS. The Sales Confirmations related to 11 sales and deliveries of marine fuel oil by Panoil to WFS. The Sales Confirmations were said by CIMB to incorporate Panoil’s Terms and Conditions for Sales of Marine Fuel (the T&Cs). Clause 8.4 of the T&Cs contained an express ‘no set-off’ clause.

Panoil’s rights under the Contracts were among the rights purportedly assigned to CIMB under the Debenture. 

In August 2017, CIMB found that Panoil was experiencing financial difficulties. CIMB proceeded to issue and serve on WFS a notice of assignment of Panoil’s rights under the Contracts and the related receivables. In February 2018, CIMB sought to exercise its rights as the legal assignee of those rights by enforcing the Debenture. CIMB brought claims against WFS for sums due and owing from WFS to Panoil under the Contracts. 

WFS declined CIMB’s claim and advanced three main defences: 

(a) the Debenture was not authentic; 

(b) the Debenture did not assign Panoil’s rights under the Contracts to CIMB; and 

(c) the Contracts were in fact governed by additional terms contained in (i) various contracts of affreightment and transportation (referred to as the “Umbrella Contracts”) and (ii) an offset agreement (referred to as the “Offset Agreement”), each being an agreement between Panoil and WFS which pre-dated the Contracts.

WFS argued that the Umbrella Contracts and the Offset Agreement gave WFS the right to set-off sums due and owing to Panoil against sums due from Panoil under other transactions between WFS and Panoil. WFS argued that the transactions were all part of a composite ‘buy-sell’ relationship in which Panoil sold fuel oil to WFS before Panoil then bought the same quantity of oil back from WFS. Having exercised its rights of set-off, WFS argued that it no longer owed any sums to CIMB, as alleged assignee of such rights under the Debenture. 

CIMB commenced proceedings against WFS in the Singapore High Court.