Letters of Comfort Readdressed

In HSBC v Jurong Engineering Ltd1, the High Court of Singapore examined the expectation that legal consequences should attach to assurances given by a parent company in support of its subsidiary's obligations.

The case concerned the issue of whether a letter of awareness2 (the 'Letter') created a binding obligation on Jurong to recompense HSBC for losses incurred in relation to credit facilities granted to a subsidiary of Jurong. One of the key terms of the Letter provided that if the subsidiary was unable for any reason to meet its obligations, Jurong would endeavour to make funds available in amounts sufficient to enable the subsidiary to meet its obligations. The subsidiary failed to make various repayments and was wound-up by another creditor. HSBC's subsequent claim for breach of the Letter was dismissed on the ground that in addition to the parties' conduct in negotiating it...