Rabobank v Motorola: Set-Off vs. Assignment in Trade Finance Dispute

In Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International), Singapore Branch v Motorola Electronics Pte Ltd, the Singapore High Court addressed a dispute between Rabobank, the plaintiff, and Motorola Electronics Pte Ltd, the defendant, concerning the assignment of receivables. Rabobank claimed US$5,178,212.41 from Motorola for invoices issued by Jurong Hi-Tech (JHT) and assigned to Rabobank. Motorola argued a tripartite set-off agreement existed between JHT, Motorola Trading Center Pte Ltd (MTC), and Motorola, allowing them to set off debts. The court, Lai Siu Chiu J, found sufficient evidence of an implied tripartite contractual set-off agreement, predating the notice of assignment, and dismissed Rabobank's claim, ordering Rabobank to pay costs to Motorola on a standard basis up to January 6, 2010, and on an indemnity basis thereafter.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claim dismissed with costs to the defendant.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case involving set-off and assignment laws. Rabobank sued Motorola over unpaid invoices. Court dismissed Rabobank's claim.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Coöperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International, Singapore Branch)PlaintiffCorporationClaim DismissedLost
Motorola Electronics Pte LtdDefendantCorporationJudgment for DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Gregory VijayendranRajah & Tann LLP
Olivia LowRajah & Tann LLP
Sung JingyinRajah & Tann LLP
Tan Kay KhengWongPartnership LLP
Tan Shao TongWongPartnership LLP
Chan Xiao WeiWongPartnership LLP
Cheryl FuWongPartnership LLP

4. Facts

  1. JHTI manufactured electronic products for Motorola since 2003.
  2. Motorola and JHTI entered into a Manufacturing and Assembly Agreement (MAA) in 2004.
  3. MTC began supplying materials to and purchasing electronics products from JHTI in 2005.
  4. Plaintiff and JHTI entered into a Master Receivables Purchase Agreement (MRPA) in 2007.
  5. Plaintiff notified Motorola of the assignment of receivables in November 2008.
  6. Motorola claimed a tripartite set-off agreement existed between JHTI, MTC, and Motorola.
  7. The set-offs were exercised on 22 October 2008 and 21 November 2008.

5. Formal Citations

  1. Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International), Singapore Branch v Motorola Electronics Pte Ltd, Suit No 74 of 2009, [2010] SGHC 70

6. Timeline

DateEvent
JHTI began manufacturing electronic products for the defendant.
Defendant and JHTI entered into the Manufacturing and Assembly Agreement.
MTC began supplying materials to and purchasing electronics products from JHTI.
Motorola Inc. and JHTI entered into a Manufacturing Services Agreement.
Plaintiff and JHTI entered into a Master Receivables Purchase Agreement.
Plaintiff decided to cease its commercial relationship with JHTI.
Plaintiff decided not to accept new purchase requests from JHTI.
Motorola set off US$4,694,848.57 owed by JHTI to MTC against US$4,694,848.57 owed by the defendant to JHTI.
Plaintiff cancelled the receivables financing facilities extended to JHTI.
Plaintiff notified the defendant of the assignments of the purchased receivables.
Motorola set off US$1,761,942.26 owed by the defendant to JHTI, and US$826,408.03 owed by MTC to JHTI, against US$2,588,350.29 owed by JHTI to MTC.
Defendant received the plaintiff's letter dated 17 November 2008.
Plaintiff wrote to the defendant setting out the sums that were owing pursuant to the notifications.
Defendant acknowledged receipt of the letter dated 17 November 2008.
Plaintiff sent a letter to the defendant enclosing copies of further notifications.
JHTI has been under judicial management since.
Defendant made an Offer to Settle to the plaintiff.
Judgment reserved.

7. Legal Issues

  1. Tripartite Contractual Set-Off Agreement
    • Outcome: The court found sufficient evidence to imply a tripartite contractual set-off agreement between JHTI, MTC, and the defendant.
    • Category: Substantive
    • Sub-Issues:
      • Implied agreement
      • Course of dealings
      • Mutuality
  2. Notice of Assignment
    • Outcome: The court found that the plaintiff's notice of assignment was received after the set-off had taken place, and therefore the assignment was subject to the set-off.
    • Category: Substantive
    • Sub-Issues:
      • Adequacy of notice
      • Date of notification
      • Silent assignment
  3. Mutuality in Set-Off
    • Outcome: The court held that the requirement of mutuality can be overridden by a contractual set-off agreement in the absence of insolvency.
    • Category: Substantive
    • Sub-Issues:
      • Requirement of mutuality
      • Exceptions to mutuality
      • Contractual override

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract
  • Assignment of Receivables

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation
  • Trade Finance Litigation

11. Industries

  • Banking
  • Electronics Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Commercial Factors Ltd v Maxwell Printing LtdHigh CourtYes[1994] 1 NZLR 724New ZealandCited as persuasive authority that a contractual set-off agreement can be implied from the surrounding circumstances and conduct of the parties and that such a contract is an equity that the assignee takes subject to.
William Brandt's Sons & Co v Dunlop Rubber Co LtdN/AYes[1905] AC 454England and WalesCited for the principle that receipt of the notice of assignment by the debtor prevents the discharge of the debt by the debtor’s payment to the assignor.
Downam v MatthewsN/AYesCh. Prec. 580 [1721]N/ACited for the principle that an agreement to set off can arise from the course of dealings.
Paul Smith Ltd v H & S International Holding IncEnglish Commercial CourtYes[1991] 2 AC 127England and WalesCited for the principle that a set-off agreement inferred from a course of dealing between the parties may be strong enough to override a no set-off provision.
Jeffs v WoodN/AYes[1723] 2 P WMS 128N/ACited for the principle that slight evidence of the agreement is sufficient to imply a contractual set-off agreement.
Lundy v McCullaN/AYes(1865) 11 Gr. 368N/ACited for the principle that the court accepts slighter evidence of an agreement to set-off than is usually required in order to establish disputed facts.
Wallis v BastardN/AYes(1853) 4 De GM & G 251N/ACited for the principle that the principle of set-off is quite consistent with natural equity, and that where it can be adopted, it is an arrangement which this Court will be very ready to assist.
Latreefers Inc (In Liquidation) v Tangent Shipping Co LtdN/AYes[2000] BCLC 805England and WalesCited as an English decision where the court found there to be sufficient evidence of a tripartite set-off agreement.
Bank of Credit and Commerce International (Overseas) Ltd (In Liquidation) v Habib Bank LtdN/AYes[1999] 1 WLR 42England and WalesCited for the general rule that there must be mutuality between the two claims to be set off.
Freeman v. LomasN/AYes(1851) 9 Hare 109N/ACited for the principle that where there is an absence of mutuality, an agreement whether express or implied, may confer a right of set-off and slight circumstances would be sufficient to warrant the court in presuming such an agreement.
The Jarguh SawitN/AYes[1998] 1 SLR(R) 648SingaporeCited for the principle that the assignee of a debt takes subject to equities that existed prior to the notice of assignment being given to the debtor.
Pacrim Investments Pte Ltd v Tan Mui Keow Claire and anotherN/AYes[2005] 1 SLR(R) 141SingaporeCited for the principle that the assignee of a debt takes subject to equities that existed prior to the notice of assignment being given to the debtor.
Hongkong and Shanghai Banking Corp Ltd v United Overseas Bank LtdN/AYes[1992] 1 SLR(R) 579SingaporeCited for the principle that the assignee of a debt takes subject to equities that existed prior to the notice of assignment being given to the debtor.
Brice v BannisterN/AYes(1878) 3 QBD 569England and WalesCited for the principle that the assignee of a debt takes subject to equities that existed prior to the notice of assignment being given to the debtor.
Mangles v DixonN/AYes(1852) 3 HLC 702, 10 ER 278N/ACited for the principle that the assignee takes precisely the same interest and is subject to the same liabilities as the assignor.
Roxburghe v CoxN/AYes(1881) 17 Ch. D. 520England and WalesCited for the principle that the assignee takes subject to a contractual set-off agreement, provided that the agreement was made prior to notice of assignment given to the debtor.
Re Agra and Masterman’s BankN/AYes(1867) L.R. 2 Ch. App. 391England and WalesCited for the principle that the rule that the assignee of a debt takes subject to equities that existed prior to the notice of assignment being given to the debtor can be excluded or modified by the terms of the contract between the debtor and assignor.
Johnstone v CoxN/AYes(1881) 16 Ch.D. 17England and WalesCited for the principle that the relevant date to determine effective notice is the date on which the notice is received by the debtor and not that on which it is sent.
James Talcott Ltd v John Lewis & Co Ltd and North American Dress Co LtdN/AYes[1940] 3 All E.R. 592England and WalesCited for the principle of what constitutes sufficient notice to the debtor.
Denney, Gasquet & Metcalfe v ConklinN/AYes[1913] 3 KB 177England and WalesCited for the principle that the language is immaterial if the meaning is plain, but that plain meaning must be that the debt and the right to receive it have been transferred to the third party.
Bence v ShearmanN/AYes[1898] 2 Ch 582England and WalesCited for the principle that for notices relevant to the Dearle v Hall rule, the notice must be clear and distinct.
Lloyd v BanksN/AYes(1868) LR 3 Ch App 488England and WalesCited for the principle that there must be proof that the mind of the debtor has been brought to an ‘intelligent apprehension of the assignment’ so that the reasonable man, or an ordinary man of business, would act upon the information and would regulate his conduct by it; and constructive notice would not suffice.
Van Lynn Developments Ltd v Pelias Construction Co LtdN/AYes[1969] 1 QB 613England and WalesCited for the principle that it is not necessary to state the date of assignment to constitute sufficient notice.
Altus Technologies Pte Ltd (under judicial management) v Oversea-Chinese Banking Corp LtdN/AYes[2009] 4 SLR(R) 296SingaporeCited for the principle that contractual set-offs can be exercised in judicial management as the pari passu principle applies not in judicial management, but in winding-up.
Business Computers Ltd v. Anglo-African Leasing LtdN/AYes[1977] 1 WLR 578England and WalesCited for the principle that there must be an existing debt owing by the assignor to the debtor before notice; if a debt accrues only after notice pursuant to a contract entered before notice, the debt cannot be set off.
Watson v Mid Wales Railway CoN/AYes(1867) LR 2 CP 593England and WalesCited for the principle that if there were sufficient facts to support the inference of a contractual set-off agreement, the agreement would be an equity that the assignee had taken subject to.

13. Applicable Rules

Rule Name
Order 22A of the Rules of Court (Cap 322, R 5, 2006 Rev Ed)
Order 22A rule 9(3) of the Rules

14. Applicable Statutes

Statute NameJurisdiction
Civil Law Act Cap 43 (1999 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Set-off
  • Assignment
  • Receivables
  • Tripartite Agreement
  • Mutuality
  • Silent Assignment
  • Master Receivables Purchase Agreement
  • Manufacturing and Assembly Agreement
  • Invoices
  • Debtor
  • Assignee
  • Assignor

15.2 Keywords

  • set-off
  • assignment
  • receivables
  • Motorola
  • Rabobank
  • Singapore
  • High Court
  • contractual agreement
  • trade finance

17. Areas of Law

Area NameRelevance Score
Set-off95
Assignment Law90
Contract Law80
Breach of Contract70
Commercial Litigation50
Summary Judgement30
Restructuring and Insolvency20

16. Subjects

  • Contract Law
  • Banking Law
  • Commercial Law
  • Civil Procedure