Arab Banking Corporation v Saad Trading & Financial Services Company & Anor

On a summary judgment application, the claimant must show that the defence has no real prospect of success and that there is no compelling reason for trial. Commercial documents should be construed realistically and as a whole. A marginal departure from a contractual time limit may be waived where the limit protects only the lender, and informal conduct may show that strict compliance was not required. A broad guarantee may preserve the guarantor’s liability despite such concessions. An excessive demand does not necessarily invalidate a guarantee demand, particularly where the underlying liability is identifiable and a corrected demand is later served.

The claimant bank sought summary judgment against a Saudi Arabian partnership and its chairman, who had guaranteed the partnership’s liabilities. The claim concerned unpaid advances made under a trade finance facility.

The defendants argued that the advances were made under a separate December 2008 agreement, or that the facility had been varied. They relied on differences concerning the maturity period, notice fax number, jurisdiction clause and utilisation notices. The guarantor also argued that an excessive demand invalidated liability under the guarantee.

1. Summary judgment. The claimant established that the defences had no real prospect of success. No compelling reason for trial was shown.
2. Facility agreement. The documentation and subsequent correspondence were only consistent with the advances having been made under the existing facility. References to promissory notes, commercial invoices, discounting and the facility’s loan reference supported that conclusion.
3. 181-day period. The one-day difference from the stated 180-day period did not take the advances outside the facility. The contractual language could accommodate a six-month period expressed by reference to a 360-day year. In any event, the bank had waived strict compliance. The period was for the bank’s protection, and the bank’s conduct showed that it did not insist upon it.
4. Variation and notices. The December letters did not clearly vary the facility. There was no clear acceptance of any offer to vary. The different fax number was immaterial because the advances were recoverable at maturity without demand. The absence of prescribed utilisation notices showed, at most, that the bank had waived strict compliance.
5. Guarantee. The guarantee’s wide terms covered the bank’s waiver of strict compliance with the facility’s procedural and time requirements. The guaranteed liability arose under the facility.
6. Excessive demand. A demand for more than the sum actually due did not invalidate the guarantee demand. The court rejected the approach in Donnelly v National Australia Bank and accepted the contrary proposition supported by the authorities discussed in the cited textbook, including Bunbury Foods v West Beck Banking. In any event, a later corrected demand was sufficient for the claimant to obtain relief.
7. Summary judgment was granted to the claimant.