According to Mr Justice Stuart-Smith, the normal approach to on-demand bonds is pay now, argue later. But what if there is a dispute as to whether the demand is justifiable?
In refusing to stop the calling of an on-demand retention bond, the judge said, after considering previous case law, that the only established exceptions to the rule that the court will not intervene should be where there is a seriously arguable case of fraud, or it has been clearly established that the beneficiary is precluded from making a call by the terms (express or implied) of the underlying contract. The notion that there should be a preliminary dispute about whether the underlying demand is justifiable goes directly against the normal pay now, argue later approach to on-demand bonds.
MW High Tech Projects UK Limited v Biffa Waste Services Limited