WFS declined CIMB’s claim. WFS 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) contracts of affreightment and, importantly, (ii) an offset agreement, each being agreements between Panoil and WFS which pre-dated the Contracts. These were referred to as the “Umbrella Contracts”. 

WFS argued that the Umbrella Contracts 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, 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.

Issues and judgment

The court dismissed CIMB’s claim. The judge found that CIMB had not sufficiently evidenced the authenticity of the Debenture, as it was required to do pursuant to section 66 of the Evidence Act (Cap 97, 1997 Rev Ed), when it was put to proof by WFS in respect of the issue. As such, CIMB’s claim failed. The court continued to consider the other defences relied on by WFS, in a judgment from which some key themes can usefully be extracted. The issues were as follows. 

1. Whether CIMB had proven the authenticity of the Debenture: WFS called into question the authenticity of Panoil’s signatures on the Debenture. CIMB declined to call the Panoil signatories as witnesses to confirm the authenticity of their signatures, apparently for reason that they were under investigation for wrongdoing against it, including for ‘double-financing’, and CIMB had doubts as to their credibility in such circumstances.

The court expressed the view that this would not, by itself mean that their evidence in court would have been unreliable.  

Pursuant to the Singapore rules of evidence and court procedure, the court concluded that CIMB had failed to prove, as required, the authenticity of the signatures and of the Debenture itself. On this basis alone, the court dismissed CIMB’s claim in full.

2. Whether Panoil’s rights under the Contracts had been assigned under the Debenture: WFS had argued that CIMB had failed to plead that the relevant clause of the Debenture, which purported to assign to it Panoil’s rights, title, benefit and interest under the Contracts, applied. WFS concluded from such failure that, on a true construction of the Debenture, Panoil’s rights under the Contracts had not been assigned to CIMB. The court rejected this technical argument, finding that CIMB had fully pleaded the relevant clause of the Debenture, albeit not by expressly referring to it by number. The court decided that the clause was sufficiently wide to include Panoil’s rights under the Contracts, being present or future “contract rights” that were due and owing to Panoil by WFS.
3. Which documents governed the transactions: CIMB argued that the assigned transactions were governed by the Sales Confirmations, which incorporated the T&Cs by reference. CIMB relied on provisions prohibiting set-off contained in the T&Cs as the basis for its argument that WFS was not permitted to offset sums owed by Panoil against the assigned amounts payable to Panoil. WFS contended that the Umbrella Contracts governed and/or applied to the relevant transactions and these imported express rights in favour of WFS to offset Panoil’s obligations against the assigned receivables. 

The court carried out a review of the authorities relevant to principles surrounding contractual formation. In a careful and fact-specific analysis, the court noted that: 

(a) An objective approach to contractual formation requires the court to ascertain the parties’ objective intentions, gleaned from their correspondence and conduct in the light of a “relevant background”. Such relevant background includes the industry which the parties are in and the parties’ actual dealings.¹

(b) Following a ‘battle of the forms’, the Sales Confirmations for each Contract were the final documents exchanged between the parties, thereby containing the essential terms of the Contract. The court accepted expert evidence to the effect that bunkering industry practice usually treats sales confirmations as the governing sale and purchase contracts.

(c) None of the key documents behind the relevant transactions made any express reference to the Umbrella Contracts. Presumptively, this suggested that the Umbrella Contracts were not intended by the parties to apply. Further, none of the transactions envisioned under the Umbrella Contracts corresponded with the transactions concluded and performed by WFS and Panoil. WFS had not evidenced the existence of any particular contracts for the sale of marine oil fuel by WFS to Panoil which would evidence the alleged composite ‘buy-sell’ relationship claimed and, under the terms of the Umbrella Contracts, operate so as to set off any sums due by WFS to Panoil. In contrast, the T&Cs containing the no set-off provision were clearly referenced in all of the Sales Confirmations.

4. Whether WFS was entitled to set off the sums due under the Contracts before its notice of assignment: The court found that the Sales Confirmations gave “reasonable notice” of the T&Cs. The T&Cs and the no set-off provision they contained were incorporated into the Sales Confirmations. On this issue, the court said that incorporation of terms by reasonable notice is “by its very nature, heavily dependent on the particular facts of the case concerned, and that actual notice is not required for incorporation”.² The court therefore took into account the fact that WFS was a sophisticated commercial party, with a history of business dealings with Panoil. In fact, actual notice of the T&Cs was demonstrated, insofar as WFS was shown to have a copy of the T&Cs in its possession. 

Importantly, the court also found that, even if the Umbrella Contracts applied to the relevant transactions, their terms would, on the facts, have been superseded by those of the T&Cs. The court applied the relevant authorities on the approach to be taken where there is inconsistency between terms in different applicable contractual documents;³ in particular, where a contract does not expressly provide an order of precedence between clauses or documents, “the more specific document ought to prevail over a standard form document”.

Following a fact-specific analysis of the circumstances, the court found that the T&Cs (which expressly prohibited set-off) were incorporated into the Sales Confirmations. The court found that the T&Cs would have superseded the terms of the Umbrella Contracts (which allowed for set-off) even if the Umbrella Contracts had been applicable.

Finally, the court found that there was no equitable right of set-off available to WFS. An equitable right of set-off may be granted where there is a close relationship or connection between dealings and transactions, so that it would be unfair to allow one claim to be enforced without regard to the other. The court reminded the parties that the authorities are clear, that a contractual provision which broadly excludes all rights of set-off is sufficient to exclude both legal and equitable rights of set-off.⁴

Key takeaways

The case may serve as a useful reminder in relation to some of the complexities surrounding assignments in the context of trading. Had the court accepted the authenticity of the Debenture, the case may have been decided differently and in favour of CIMB, based on a complicated analysis of the terms of the assigned transactions and determination as to the hierarchy of the competing relevant terms governing the relationship between buyer and seller (i.e., debtor and creditor).

In this particular case, the Sales Confirmations incorporated the T&C with their no set-off provisions, and these were found to be “more specific” to the relevant transactions than the terms of the offset agreement contained in the Umbrella Contracts. 

At the same time, the express exclusion of set-off rights was sufficiently clear so as to exclude both equitable and contractual rights of set-off.

Finally a debtor receiving a notice of assignment may raise any defence, set-off or counterclaim against the assignee, which it could validly have raised against the assignor, so long as such defence, set-off or counterclaim is founded on matters which arose before the debtor received notice of the assignment. 

Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style, Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

1. RI International Pte Ltd v. Longstroff AG [2015] 1 SLR 521 and Yap Son On v. Ding Pei Zhen [2017] 1 SLR 219.
2. The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) at paragraph 07.022.
3. Sintalow Hardware Pte Ltd v. OSK Engineering Pte Ltd [2017] 2 SLR 372.
4. Koh Lin Yee v. Terrestrial Pte Ltd and another appeal [2015] 2 SLR 497.

Client Alert 2020-396