Kleinwort Benson Ltd v Malaysia Mining Corp Bhd
A letter of comfort that states a present policy, rather than promising future conduct, is not a contractual promise.
Facts
Kleinwort Benson agreed to lend £10 million to MMC Metals, a subsidiary of Malaysia Mining Corporation, for dealing on the London Metal Exchange. MMC refused to guarantee the loan, but gave a letter of comfort stating that it is our policy to ensure that the business of MMC Metals is at all times in a position to meet its liabilities to you under the facility. When the tin market collapsed in 1985, MMC Metals went into liquidation owing the bank the full amount, and MMC refused to pay.
Legal principle
The Court of Appeal held that MMC was not liable. The statement was a representation of MMC's policy at the time it was made, not a contractual promise that the policy would continue in the future. The bank had asked for a guarantee and had accepted a letter of comfort instead, charging a higher rate of interest, which showed that the parties understood MMC was not assuming legal responsibility. The court did not need to rely on any presumption: it simply construed the letter, and the words did not amount to a promise.
Related cases on intention to create legal relations
- Attrill v Dresdner Kleinwort Ltd [2013] EWCA Civ 394, [2013] 3 All ER 607
- Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274, [2002] 1 All ER (Comm) 737
- Balfour v Balfour [1919] 2 KB 571
- Blue v Ashley [2017] EWHC 1928 (Comm)
- Edwards v Skyways Ltd [1964] 1 WLR 349
- Esso Petroleum Co Ltd v Commissioners of Customs and Excise [1976] 1 WLR 1
- Jones v Padavatton [1969] 1 WLR 328
- Jones v Vernon's Pools Ltd [1938] 2 All ER 626
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
