Case Note: Vulnerable Sureties, a Bank's Responsibility and the O'Brien-Etridge Principles: The Bank of East Asia Ltd V Mody Sonal M

Abstract

The subject of a bank's responsibility for a debtor's misconduct towards a surety is as important as it is controversial. The two momentous decisions of the House of Lords in Barclays Bank Plc v O'Brien [1994] 1 AC 180 and Royal Bank of Scotland Plc v Etridge (No 2) [2002] 2 AC 773 have dramatically altered the law. Further, in the latter case, Lord Nicholls of Birkenhead proposed further and even more radical changes to the law. In The Bank of East Asia Ltd v Mody Sonal M, the Singapore High Court was faced with the issue of whether the bank was affected by the alleged undue influence exercised on the sureties. This case comment examines the Singapore decision and, in particular, whether it clarifies the applicability of the O'Brien-Etridge principles and propositions.

Keywords: Contract law, vitiating factors, presumption of undue influence, equity, land law, mortgages to banks, personal guarantees

JEL Classification: K12