HANG LUNG BANK LTD. v. ASIA LANDS AND PROPERTIES LTD.

IN THE COURT OF APPEAL

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JUDGMENT

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Sir Alan Huggins, V.-P.:

1. This is an action by the Hang Lung Bank against a company which was one of its customers.

2. The Bank advanced to the Defendant at the Defendant's request the sum of $45,000,000. This was to be repayable twelve months after the date of the advance and it was agreed that interest should be paid at 2% per annum over and above the prime rate for the time being. That much seems never to have been in dispute.

3. The Plaintiffs took out a summons under 0.14 and the Master gave leave to enter judgment. On appeal to the judge in chambers the judgment was confirmed.

4. It appears that the matter was argued in the court below on a point relating to "without prejudice" correspondence and the matter arose like this. The Defendant set up a second agreement to the effect that, because the Bank had demanded payment before the expiration of twelve months, it would waive any interest. That second agreement was apparently never denied by the Plaintiff, but there was a third agreement set up, which was alleged to be contained in "without prejudice" correspondence, and the terms of that third agreement was that, if the Bank waived a claim for a surcharge for early repayment and also a claim for interest upon interest, the Defendant would pay the sum of interest which was due under the original agreement between the Bank and customer. It has now been sought to amend the Statement of Claim and to rely upon that agreement as a substantive cause of action. We have not made that amendment, and in my view it should not be made at this stage in the proceedings. It would be wrong, I think, in the Court of Appeal on a hearing under 0.14 to change the whole basis of the claim, and I do not accept that the whole of the argument before the Master and the Judge was on the basis that there was this further cause of action. Whether or not we should subsequently grant leave to amend is an entirely different matter.

5. The case has been argued on the basis that there was in the "without prejudice" letter a concluded agreement and that somehow that concluded agreement overrides the other two agreements to which I have referred. The answer, as it seems to me, is that when one looks at the "without prejudice" correspondence it is impossible to find a binding agreement, nor is it reasonably arguable that there is one. What happened was that these quite unjustified demands were made by the Bank, first for a surcharge for early payment - which on the evidence had been asked for by the Bank itself - and then secondly for interest on interest - which it is agreed could not properly be made. To suggest that by not pressing those two claims the Bank was providing consideration for a promise to pay a sum of money a sum of money which, according to the original contract, the customer would have been bound to pay - seems to me to be a quite untenable argument. It appears that the failure to consider clearly what were the various agreements which were being alleged - and their precise terms - has led to confusion and in my view the answer to the present matter is that there was no concluded contract shown in the "without prejudice" correspondence, that the "without prejudice" correspondence therefore should not be looked at, that we have in the second of the three alleged agreements an arguable defence put up by the Defendant and, therefore, that there should have been leave to defend.

6. I would allow this appeal.

Cons, J.A.:

7. I must say with every respect to those concerned that it seems to me that, if it had been insisted at either hearing below that the alternative grounds on which it was suggested both those hearings were argued had been set out in black and white at the time, perhaps this matter may not have reached the stage that it has. In any event I am not persuaded that an agreement of the kind suggested is clear upon the correspondence let alone so clear as to warrant an 0.14 judgment, and I too would allow the appeal, set aside the judgment and give unconditional leave to defend.

Fuad, J.A.:

8. I also agree with my brothers that the appeal should be allowed and unconditonal leave should be given to defend. The true construction of the "without prejudice" letters and their effect in law is, in my judgment, a matter regarding which there could be much reasonable competitive argument, and I will say no more than that, as I read them, I think the Bank will not find it all that easy to succeed on the basis of a new binding agreement revealed by the letters. There are, it seems to me, triable issues.

16th October 1984