In June 2020, the High Court of Singapore (now the General Division of the High Court) dismissed a lawsuit commenced by CIMB Bank Berhad (“CIMB”) against World Fuel Services (Singapore) Pte Ltd (“WFS”) (See CIMB Bank Berhad v World Fuel Services (Singapore) Pte Ltd  SGHC 117.
On 5 March 2021, the Court of Appeal dismissed CIMB’s appeal, upholding the learned Judge’s decision at first instance, albeit on different grounds.
The Court of Appeal’s judgment (CIMB Bank Berhad v World Fuel Services (Singapore) Pte Ltd  SGCA 19) is important for its ruling on the rights of set-off and provides useful guidance to litigants on proving the authenticity of documents.
Before we discuss the Court of Appeal’s decision below, we first look at the background and the learned JC’s decision in the first instance.
CIMB claimed that by a Deed of Debenture (the “Debenture”), Panoil Petroleum Pte Ltd (“Panoil”) had assigned all goods and/or receivables associated with goods financed by the bank.
WFS was a bunker trader and had a commercial relationship with Panoil starting in 2014. It was envisaged that WFS and Panoil would have to buy and sell marine fuel to each other. As such, WFS and Panoil entered into an Offset Agreement in 2014 which granted WFS the right to setoff sums owed by Panoil against sums owed by WFS to Panoil (the “2014 Offset Agreement”).
In or around August 2017, Panoil faced financial difficulties. CIMB issued a notice of assignment to WFS on 29 August 2017 (the “NOA”). The NOA put WFS on notice that, pursuant to the Debenture, Panoil had assigned all its rights, title, interest and benefit under certain Panoil invoices (the “Subject Invoices”) to CIMB. CIMB then demanded payment from WFS of the sums under those Subject Invoices, including late payment interest.
WFS denied CIMB’s claim on the basis that it had exercised its right of set-off under (among other things) the 2014 Offset Agreement, such that there were no outstanding amounts owed by WFS to Panoil under the Subject Invoices when the NOA was received.
CIMB thus commenced HC/S 184/2018 based on its rights under the Debenture as the legal assignee.
WFS disputed the authenticity of the Debenture and also claimed a right of set-off against the Subject Invoices. WFS claimed that in exercise of its rights under the 2014 Offset Agreement, it had issued eight offset notices and that by virtue of these notices, it had set off the entire sum due to Panoil under these Subject Invoices.
In response, CIMB claimed that the WFS invalidly exercised its right of set-off under the 2014 Offset Agreement as the outstanding Panoil Subject Invoices were governed by Panoil’s Sales Confirmations. In turn, CIMB claimed that Panoil’s Sales Confirmations incorporated Panoil’s Terms and Conditions (“Panoil’s T&Cs”). CIMB argued that Panoil’s T&Cs superseded the 2014 Offset Agreement and thus, only Panoil’s T&Cs governed the Subject Invoices. Further, CIMB stated that clause 8.2 of Panoil’s T&Cs precluded the right of set-off and WFS had thus invalidly set-off the Subject Invoices against sums owed by Panoil to WFS.
Two issues thus arose in this case:
- Has CIMB proven the authenticity of the Debenture?
- Was WFS entitled to a contractual right of set-off?
The High Court’s decision
Authenticity of the Debenture
The learned JC held that the burden rested on CIMB to prove the authenticity of Panoil’s signatures on the Debenture and that producing the original Debenture was not sufficient to discharge that burden.
As the Debenture bore only the signatures of Panoil’s Yong Chee Ming (“Yong”) and Lim Shi Zheng (“Lim”), the learned JC was of the view that CIMB ought to have called Yong and Lim as witnesses. Notwithstanding, CIMB sought to prove the authenticity of the Debenture by inviting the Court to compare their signatures (against signatures in other documents) under section 75 of the Evidence Act (Cap. 97). In this regard, the learned JC did not find it appropriate to exercise his discretion to so as (among other things) the Court was not generally equipped to compare signatures to ascertain their authenticity.
The learned JC thus held that CIMB failed to prove the authenticity of the Debenture. The learned JC stated that CIMB “took a calculated but ultimately ill-advised risk not to call Yong and Lim [as witnesses]”. On this basis alone, the learned JC dismissed CIMB’s claim.
Notwithstanding that CIMB’s claim failed on the basis that the authenticity of the Debenture had not been proven, the learned JC went on to consider whether WFS had rights of set-off and whether they had been validly exercised. In this regard, the learned JC held in the negative, finding in favour of CIMB on these issues.
The learned JC reached this conclusion after examining the “classic battle of the forms” scenario and held that that Panoil’s Sales Confirmations and T&Cs were the “last shot” and thus superseded the 2014 Offset Agreement. The learned JC also held the view that the 2014 Offset Agreement was not intended by the parties to cover the Subject Invoices as the parties did not refer to it in the documents relating to the Subject Invoices.
Given that clause 8.2 of Panoil’s T&Cs precluded any right of set-off, the learned JC held that WFS was not entitled to exercise any rights of set-off under the 2014 Offset Agreement against the Subject Invoices.
The Court of Appeal’s decision
Authenticity of the Debenture
Before addressing parties’ substantive arguments, the Court of Appeal dealt with CIMB’s submission that WFS had not raised the authenticity of the Debenture as an issue as WFS did not plead that the signatures on the Debenture were forged.
The Court of Appeal rejected this argument, stating that a party could dispute the authenticity of a document in various ways. For example, the disputing party could:
- allege specifically that the signatures were forgeries;
- deny the authenticity of the document;
- not admit the authenticity of a document either by a specific or general averment in the pleadings; or
- by way of a notice of non-admission.
It was thus not necessary for WFS to plead that the signatures on the Debenture were forged. It was open to WFS to plead forgery if it had a basis for doing so or it could simply put CIMB to strict proof of the execution of the Debenture.
In the present case, WFS issued 2 notices of non-admission in respect of the Debenture. By issuing the notices of non-admission, the Court of Appeal held that “WFS had made it clear to CIMB that it was disputing the authenticity of the Debenture”. Hence, CIMB “knew that it still had the burden of establishing authenticity”.
The Court of Appeal then went on to consider whether that burden had been discharged.
In doing so, the Court of Appeal made it clear that the mere production of an original of a document would not be sufficient to prove its authenticity. In this regard, the Court of Appeal agreed with the learned JC that CIMB still had to prove whether the Debenture paper document was what it purported to be. Hence, even after primary or secondary evidence of a document is produced, its authenticity still had to be established.
As CIMB did not call Yong and/or Lim as witnesses to attest to the authenticity of the Debenture (which was signed only by them), CIMB could rely only on the indirect or circumstantial evidence to prove the Debenture’s authenticity. However, the Court of Appeal provided the following points of guidance:
- the maker of a document should generally be called as a witness to prove its authenticity;
- a party’s failure to call a witness to give direct evidence could potentially result in an adverse inference being drawn against it; and
- omitting to call such a witness is however not necessarily fatal as a party may rely on the strength of the indirect or circumstantial evidence adduced. A party may thus rely on indirect or circumstantial evidence to establish authenticity even where direct evidence would have been available.
After considering the circumstantial evidence, the Court of Appeal held that CIMB had proven the authenticity of the Debenture. The following facts were taken into consideration by the Court of Appeal in reaching this conclusion:
- the Debenture was registered with the Accounting and Corporate Regulatory Authority (“ACRA”);
- the Debenture was registered with the lodgement of the Statement of containing the Particulars of the Charge (“POC”) which referred to the date of the instrument as 15 July 2016, and described it as a limited deed of debenture.
- Importantly, the POC was also signed by Yong and Lim (where Lim’s designation was described as “Secretary” or alternatively as “Director”) and the authenticity of their signatures on this document was not disputed by WFS.
- Furthermore, the POC was lodged by Yeo-Leong & Peh LLC who were the solicitors for Panoil. The logical inference was that the Debenture was registered with ACRA on the instructions of Panoil. This inference could be drawn even though Ms Li from Yeo-Leong & Peh LLC was not called by CIMB as a witness;
- Panoil had affixed its seal on the Debenture which was, at the time of execution, a requirement under section 41B of the Companies Act (Cap. 50, 2006 Rev Ed).
Although the Court of Appeal observed that CIMB had been “lax” about its responsibility to prove the authenticity of the Debenture, it ultimately held that the circumstantial evidence to establish the authenticity of the Debenture was overwhelming.
As CIMB had proven the authenticity of the Debenture on the balance of probabilities, the Court of Appeal had to next consider whether WFS was contractually entitled to a right of set-off.
It must be recalled that WFS’ case was that the 2014 Offset Agreement governed the Subject Invoices and that it was thus entitled to a right of set-off. At the hearing below, the learned JC rejected this argument and held that any right of set-off had been superseded by Panoil’s T&Cs (which precluded any right of set-off under Clause 8.2).
The Court of Appeal however found that WFS was entitled to rely on the 2014 Offset Agreement when it exercise its right of set-off. The Court of Appeal observed that the 2014 Offset Agreement was “short one-page document covering one substantive issue, ie, the right of set-off” and was signed by both parties. On the other hand, Clause 8.2 of Panoil’s T&Cs was part of a pre-printed set of general terms.
Further, the 2014 Offset Agreement clearly stated that that the agreement was entered into “[i]n consideration for entering into contracts for the supply, service, distribution and/or purchase of fuel products and/or marine lubricants”.
The Court of Appeal thus agreed with WFS that the 2014 Offset Agreement ought to be construed as a master contract which prima facie applied to all contractual transactions between WFS and Panoil. In this regard, the Court of Appeal disagreed with the learned JC, and took the view that it was not necessary for subsequent contracts between the parties to explicitly refer to the 2014 Offset Agreement for that agreement to apply to them.
Given the above, the Court of Appeal held that the “battle of forms” scenario did not apply such that the last document sent (i.e. Panoil’s Sales Confirmations and Panoil’s T&Cs) applied. Instead, the Court of Appeal held that the “2014 Offset Agreement clearly superseded Clause 8.2 [of Panoil’s T&Cs] because it was specifically agreed to between the parties whereas Clause 8.2 was not”.
The Court of Appeal held that WFS was contractually entitled to a right of set-off under the 2014 Offset Agreement. WFS was thus entitled to set off the entire sum due to Panoil under the Subject Invoices before receipt of CIMB’s NOA. As such, the Court of Appeal dismissed CIMB’s appeal.
Although CIMB was ultimately able to prove the authenticity of the Debenture on appeal, it was only able to do so because of the circumstantial evidence surrounding the Debenture. Parties should take heed of the Court of Appeal’s guidance on proving the authenticity of a document. When the authenticity of a document is challenged, a party ought to meet that challenge by calling the maker of that document.
The Court of Appeal’s decision also serves as a reminder to assignees that it ought to issue its notice of assignment in a timely manner, in order to inform those dealing with the assignor of its rights as assignee.
Trading parties should also take note that a contract setting out rights of set-off is vulnerable to being dragged into a “battle of forms” scenario if not properly protected in subsequent dealings.