CIMB Bank Bhd v World Fuel Services (Singapore) Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 05 March 2021
• Neutral Citation: [2021] SGCA 19
• Year: 2021
• Docket Number: Civil Appeal Nos 107 and 130 of 2020
• Published date: 10 March 2021
• Hearing Date: 26 November 2020
• Plaintiff Counsel: Lok Vi Ming SC, Chan Kia Pheng and Yong Walter (LVM Law Chambers LLC)
• Defendant Counsel: Chan Leng Sun SC (Chan Leng Sun LLC) (instructed), Nair Suresh Sukumaran, Tan Tse Hsien Bryan, Bhatt Chantik Jayesh and Sylvia Lem Jia Li (PK Wong & Nair LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2021] SGCA 19
• Subject Matter: Contractual terms,Banking,Principles,Necessity for best evidence,Evidence,Lending and security,Contract

Woo Bih Li JAD (delivering the judgment of the court): Introduction

Civil Appeal No 107 of 2020 (“CA 107/2020”) is an appeal by CIMB Bank Berhad (“CIMB”) against the decision of the High Court judge (the “Judge”) in CIMB Bank Berhad v World Fuel Services (Singapore) Pte Ltd [2020] SGHC 117 (the “Judgment”). The Judge dismissed CIMB’s claims in Suit No 184 of 2018 (“HC/S 184/2018”) on the ground that the authenticity of a deed of debenture (the “Debenture”), which formed the basis of CIMB’s claims, was not established. Civil Appeal No 130 of 2020 (“CA 130/2020”) is CIMB’s appeal against the Judge’s costs order and is only engaged if the appeal in CA 107/2020 is not allowed.

Background to the disputes

CIMB is the Singapore branch of a bank incorporated in Malaysia and is licensed to provide banking facilities and services in Singapore to its customers. Panoil Petroleum Pte Ltd (“Panoil”) was CIMB’s customer and took banking facilities from it. Panoil was placed under judicial management in October 2017. The respondent, World Fuel Services (Singapore) Pte Ltd (“WFS”) is a bunker trader. Parties accepted that WFS had purchased marine fuel from Panoil and did not dispute the occurrence of 11 sales transactions between WFS and Panoil, which are the subject of CIMB’s claims (“Subject Transactions”). However, the actual contractual documents and/or terms that governed these transactions were disputed.

The details of the Subject Transactions and the corresponding invoices (the “Invoices”) are:

Sr. No.	Sales Confirmation Ref. No.	Invoice Date	Invoice No.	Invoice Amount (US$)	Late Payment Interest as at 19 Feb 2018 at 2% per month (US$)
1	SO-1706-0986	6 July 2017	PS-B17/07-0016	381,602.89	50,625.98
2	SO-1706-0964	9 July 2017	PS-B17/07-0025	395,953.61	51,737.94
3	SO-1707-0996	10 July 2017	PS-B17/07-0028	396,532.50	51,813.58
4	SO-1707-1027 (Amended Sales Confirmation)	20 July 2017	PS-B17/07-0047	526,258.98	64,905.27
5	SO-1707-1062	31 July 2017	PS-B17/07-0083	189,568.67	21,989.97
6	SO-1707-1065	31 July 2017	PS-B17/07-0087	204,165.00	23,683.14
7	SO-1707-1073	6 August 2017	PS-B17/08-0004	304,351.57	34,087.38
8	SO-1707-1080	7 August 2017	PS-B17/08-0008	1,890,456.80	210,470.86
9	SO-1708-1091	10 August 2017	PS-B17/08-0017	410,579.72	44,890.05
10	SO-1708-1102	10 August 2017	PS-B17/08-0023	90,013.13	9,841.44
11	SO-1707-1111	12 August 2017	PS-B17-08-0030	304,160.95	32,849.38

Each Subject Transaction in this judgment will be referred to in the order reflected in this table, ie, the transaction with the invoice dated 6 July 2017 will be referred to as the first transaction and so on.

CIMB offered Panoil loan facilities up to a limit of US$5,000,000 pursuant to a facility letter dated 29 June 2016 (the “First Facility Letter”). Subsequently, CIMB made a revision to the First Facility Letter by way of a supplementary facility letter dated 12 July 2016 (the “Second Facility Letter”). Thereafter, CIMB made variations to the First and Second Facility Letters by another supplementary facility letter dated 6 July 2017.

CIMB’s case here, and in the suit below, is that Panoil had executed the Debenture dated 15 July 2016 in favour of CIMB over all goods and/or receivables and documents representing goods financed by CIMB as security. In respect of the Subject Transactions, Panoil issued the Invoices to WFS on dates between 6 July and 12 August 2017. The aggregate sum due under the Invoices came to US$5,093,643.82 without interest (see the table at [3] above). In or around August 2017, Panoil faced financial difficulties. CIMB gave notice to WFS by way of a notice of assignment dated 29 August 2017 (the “NOA”) that Panoil had assigned all its rights, title, interest and benefit under the Invoices to CIMB. CIMB then demanded payment from WFS of the sums under the Invoices including late payment interest. When WFS did not make payment, CIMB commenced HC/S 184/2018 based on its rights under the Debenture as the legal assignee.

As to the contractual documents that governed the Subject Transactions, CIMB’s case was that the contracts governing Panoil’s sale of marine fuel to WFS were (a) Panoil’s sales confirmations (“Panoil’s Sales Confirmations”), which incorporated Panoil’s terms and conditions for sales of marine fuel (“Panoil’s Terms and Conditions”); and (b) the corresponding Invoices issued by Panoil (collectively, the “Sales Contracts”). Clause 8.2 of Panoil’s Terms and Conditions precluded the right of set-off (“Clause 8.2”).

WFS’ case was that the Subject Transactions were not governed by the Sales Contracts, but by three contracts entered into between WFS and Panoil, each of which contained a provision entitling WFS to a right of set-off: a Contract of Affreightment dated 30 December 2016 (the “2016 COA”) which governed the third transaction; a Transportation Agreement, M/T “OPHELLIA” dated 1 January 2017 (the “2017 TA”) which governed the first and second transactions; and a Contract of Affreightment dated 11 July 2017 (the “2017 COA”) which governed the fourth to eleventh transactions.

The 2016 COA, 2017 TA and 2017 COA shall be referred to collectively as the “Umbrella Contracts”. In addition, Panoil and WFS had entered into an offset agreement dated 20 August 2014, providing for the mutual setting off of certain payable sums (the “2014 Offset Agreement”). Under the 2014 Offset Agreement and the Umbrella Contracts, WFS was entitled to set off the sums due under the Invoices to Panoil.

CIMB argued that the Umbrella Contracts did not apply to the Subject Transactions, and that the terms of the 2014 Offset Agreement did not apply to or were not incorporated into the Sales Contracts. In any event, any right of set-off which arose under the Umbrella Contracts and/or the 2014 Offset Agreement had been superseded by Clause 8.2.

WFS claimed that in exercise of its rights under the 2014 Offset Agreement, it had issued eight offset notices between 11 July 2017 to 16 August 2017. By virtue of these notices, WFS had set off the entire sum due to Panoil under the Invoices. WFS claimed that at the date of the receipt of the NOA on 29 August 2017, there were no longer any amounts outstanding or accruing to Panoil pursuant to the Subject Transactions.

WFS explained its relationship with Panoil as follows. WFS was a bunker trader with access to a supply of marine fuel and entered into contracts for the supply of fuel to end-user vessels or vessel owners. However, it did not have the necessary license issued by the Maritime Port Authority to deliver the marine fuel. As such, it hired independent physical suppliers with the requisite licenses, such as Panoil, to serve as its intermediaries. Accordingly, WFS entered into “barging or delivered deals” where Panoil would be allowed to load WFS’ product on the basis that the Panoil-nominated bunker barges would deliver the fuel to WFS’ customers (the “barging or delivered deals”). It was a matter of trade practice that bunker traders such as WFS would supply marine fuel by way of sale to independent physical suppliers like Panoil on appropriate credit terms. WFS had extended credit to Panoil and permitted Panoil typically up to 30 days following delivery of marine fuel to effect payment.

WFS also explained that under these “barging or delivered deals”, WFS would sell marine fuel to Panoil and then repurchase the same quantity of marine fuel from Panoil at an agreed mark-up. The difference between the sale price and the repurchase price represented the freight payable to Panoil for transporting the fuel. This arrangement was necessary as it was a condition of Panoil’s license that it held title to the marine fuel that it was transporting at the point of supply to the vessel. WFS claimed that these “barging or delivered deals”, including the repurchases under the Subject Transactions, were governed by the Umbrella Contracts.

The decision below

At the trial, the Judge formulated the issues between the parties as follows (at [16] of the Judgment): whether CIMB had proven the authenticity of the Debenture; whether Panoil’s rights under the Sales Contracts had been assigned to CIMB under the Debenture; which documents governed the Subject Transactions; in any event, whether WFS was entitled to set off the sums due under the Subject Transactions before the NOA; and whether CIMB was required to prove loss.

The Judge dismissed CIMB’s claims on the ground that it failed to prove the authenticity of the Debenture. The Judge however, considered and found in favour of CIMB in respect of the other issues in contention, holding as follows: The language of cl 3.1(e) of the Debenture was wide enough to include Panoil’s rights under the Sales Contracts, such that pursuant to the Debenture, Panoil’s rights had been assigned to CIMB (Judgment at [66]). Panoil’s Sales Confirmations governed the Subject Transactions and the Umbrella Contracts did not. The Judge did not find it necessary to make a finding as to whether the 2014 Offset Arrangement governed the Subject Transactions as Clause 8.2 superseded any right of set-off that would have arisen under the 2014 Offset Agreement as well as the Umbrella Contracts (Judgment at [80], [111]–[112], [125]–[126]). As there was insufficient evidence of contemporaneous buy-sell transactions in connection with the Subject Transactions, there would also be insufficient evidence of closely connected dealings between Panoil and WFS. WFS therefore had no right of equitable set-off (Judgment at [134]–[135]). In any event, the Judge found that Clause 8.2 had...