Issues of Assignment and Set-Off: A Case Commentary on CIMB Bank Bhd v Italmatic Tyre & Retreading Equipment (Asia) Pte Ltd (“Italmatic Tyre “)


The Italmatic Tyre decision clarifies the position in law vis-à-vis debt assignments and the applicability of set-off agreements. This case commentary seeks to provide a summary of the case as well as a discussion on the issues which were raised in the case.



The Appellant (the Defendant at first instance) is Italmatic Tyre & Retreading Equipment (Asia) Pte Ltd (“Italmatic”). The Respondent (the Plaintiff at first instance) is CIMB Bank Bhd (“CIMB”).

In June 2016, CIMB extended trade financing facilities to its customer, Panoil Petroleum Pte Ltd (“Panoil”). As security for the facilities, an all-monies debenture was executed by Panoil in July 2016 in favor of the Respondent (“Debenture”), granting CIMB a security interest in Panoil’s goods financed by CIMB and in all of Panoil’s receivables and documents representing goods financed by CIMB.

Subsequently, in July and August 2017, Panoil entered into seven contracts to sell and deliver seven cargoes of marine fuel to Italmatic (“Contracts”). Under each Contract, sale confirmations were issued which incorporated Panoil’s standard terms and conditions (“Panoil T&Cs”). In particular, Clause 8.2 of the Panoil T&Cs obliged Panoil’s customers to pay Panoil “without deduction, set-off or counterclaim”.

Pursuant to the Contracts, Italmatic owed Panoil a sum of US$2.43m plus interest (“Debt”).

On 29 August 2017, as a result of Panoil being in financial difficulties, CIMB served a notice of assignment to Italmatic (“Notice”) in respect of the Debt, requiring Italmatic to make payment of the Debt to CIMB instead of Panoil.

As Italmatic had failed to pay the Debt, CIMB brought a claim against Italmatic for the recovery of the Debt on the basis that it was entitled to the same as the assignee of Panoil’s contractual rights against Italmatic.


Italmatic sought to argue before the Court of first instance (i.e. the Singapore High Court)[1] that the Debt had been entirely set-off (“Set-Off Defence”) or, in the alternative, cancelled (“Cancellation Defence”).

In respect of Italmatic’s Set-Off Defence, Italmatic alleged the following:

  • Panoil and Italmatic had entered into an agreement dated 1 July 2015 allowing either party to set-off any undisputed debts owed to the other (“Set-Off Agreement”).
  • The set-off was effected by way of an exchange of several letters on 13 August 2017 (“13 Aug 2017 Letters”) prior to the Notice.

The High Court found that while the Set-Off Agreement was authentic, it was inconsistent with Clause 8.2 of the Panoil T&Cs (which precluded Italmatic from exercising its right of set-off under the Set-Off Agreement), and that in any case, Italmatic had not exercised a right of set-off as the High Court found that the 13 Aug 2017 Letters were fabrications.

As to Italmatic’s Cancellation Defence, Italmatic argued that the invoices issued under the Contracts were cancelled on 18 August 2017 by way of an exchange of several letters (“Aug 2017 Cancellation Letters”). However, the High Court held that the Cancellation Letters were fabrications. Accordingly, the Debt was not cancelled in August 2017.

[1] CIMB Bank Bhd v Italmatic Tyre & Retreading Equipment (Asia) Pte Ltd [2020] SGHC 160


Italmatic appealed against the High Court’s decision on the basis that the Judge had erred in rejecting both the Set-Off and Cancellation defences. The Court of Appeal rejected both of Italmatic’s defences of set-off and cancellation.

In dismissing Italmatic’s appeal, the Court of Appeal held the following:

  • In disagreeing with the High Court’s view, the Court of Appeal held that Clause 8.2 of the Panoil T&Cs did not preclude Italmatic from exercising its right to set-off under the Set-Off Agreement. However, the Court of Appeal held that the Set-Off Agreement (which restricted the rights of set-off to undisputed amounts) does not contemplate an automatic set-off based on the express language of the agreement but merely confers on both parties the entitlement or right to effect a set-off which has to be exercised by notice and confirmation.
  • However, as the Court of Appeal found that the 13 Aug 2017 Letters (which Italmatic relied upon in support of its argument that the set-off had been effected) were fabricated, Italmatic’s Set-Off Defence therefore failed.
  • Further, the Court of Appeal affirmed the High Court’s finding that the Aug 2017 Cancellation Letters were fabricated, and held that Italmatic’s Cancellation Defence had also failed.

In addition, the Court of Appeal made the following observations in respect of the Set-Off Defence (although it left open the issue for determination in an appropriate future case):

  • An assignee of a debt takes subject to “equities” that exist prior to the notice of assignment being given to a debtor, as the assignee of a debt takes the chose in action (given that it is and cannot be in a better position than the assignor).
  • Such “equities” may arguably encompass a contractual set-off agreement, where such an agreement was made prior to the notice of assignment being served on the debtor.

If you would like to have further information on this write-up, please contact:

May Tan (Ms.)
D (65) 6358 2865
F (65) 6358 2864

Jessica Cheng (Ms.)
D (65) 6358 2865
F (65) 6358 2864

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2021-10-11T10:52:36+08:007 Oct 2021|Publications And Insights|