Clifford Chance

Bank restrained from demand call on grounds of fraud and unconscionability

20 May 2016

The Singapore High Court's decision in Boustead Singapore Ltd v. Arab Banking Corp (B.S.C.) [2015] 3 SLR 38 sounds a note of caution to those acting as guarantors in back-to-back guarantees – a guarantor must take care to ensure that the beneficiary's demand for payment is valid, and accords with the terms of the guarantee, before making a corresponding demand for payment from the account party.

This case involved a demand for payment by Arab Banking Corp under a facility agreement with Boustead Singapore Ltd. The facility agreement was entered into on a back-to-back basis to secure a guarantee issued by ABC in favour of the Bank of Commerce and Development.

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