IRVING TRUST CO v. MANILA AND HONG KONG CAPITAL CORPORATION LTD

1985, No. A5714

IN THE SUPREME COURT OF HONG KUNG

HIGH COURT

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JUDGMENT

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Background

1. These were two appeals from a decision of the Master given on the 28th of November 1985 whereby he dismissed the Plaintiffs claim for summary judgment and granted the Defendant unconditional leave to defend.

2. The Defendant is a subsidiary of the Manila Banking Corporation ("Manilabank"). In May and September 1983 two loans each of $US500,000 were made by the Plaintiff to the Defendant and they matured on the 4th November and 17th October 1983. They were renewed for various periods but finally both became due for payment on the 11th of September 1985 and a letter of demand was sent by the Plaintiffs solicitors. Payment was not made and it is the case for the Defendant that the Plaintiffs have agreed that the loans would be taken over and liabilities assumed by Manilabank.

3. On the 20th May 1985 the Plaintiffs wrote to the Defendant enclosing various documents for execution. These were:

1.    An Assumption Agreement.

2.    A Promissory note.

3.    A letter from the Central Bank in the Philippines agreeing to the assumption.

The Plaintiff asked that the Agreement and Promissory note documents be executed and returned the same day. It also asked that Manilabank register the assumption with the Central Bank. Those documents were in part so executed and the letter from the Central Bank of the Philippines was duly signed. The Assumption Agreement provides that it is "subject to the approval of the Monetary Board of the Central Bank of the Philippines and Manilabank's Board of Directors at the next scheduled meeting".

4. Subsequently a further Assumption Agreement was executed dated September 20th, 1985 in place of the one of 20th May but containing the same terms, and there was also a fresh Promissory note also dated 20th September.

5. It is not in dispute that at the time this matter came on for hearing before the master, the approval of the Board of Directors of Manilabank has not been given nor has that of the Monetary Board of the Central Bank of the Philippines. That is still the position. In an affidavit sworn on 26th November 1985 an Assistant Manager of the Defendant says that the approval of the Monetary Board is "still in processing”.

The case for the Plaintiff

6. It is the case for the Plaintiff that there were four conditions precedent for the assumption of the debt by Manilabank. Two of those were that the approval of the Board of Manilabank be obtained and also that of the Monetary Board of the Central Bank of the Phillipines. Neither has been given. No time limit was set out in the Plaintiff's letter, as it should have been, but almost three months have lapsed since the execution of the second agreement and promissory note, where no time limit is provided it is implied that there should be reasonable time having regard to all the circumstances. In the circumstances here and in view of the total lack of explanation for the delay, three months is more than reasonable.

7. There has to be accord and satisfaction to discharge the Defendant's debt and if the conditions of the assumption of debt had been met that would have been the case. However they have not been met and there is no defence to the claim. The Defendant can't rely to decision in Central London Property Trust v High Trees House Ltd. (1947, K.B.130) as there was no evidence here that the Plaintiffs promise had in part been acted on. It was not denied that the interest on the loans has continued to be paid by the Defendant, not by Manilabank.

The case for the Defendant

8. While conceding that two of the condition laid down in the assumption agreement had not yet been met Counsel for the Defendant argued that there was no time limit laid down for the approvals to be obtained and there were questions of law which should be decided at a trial, not on order 14 proceedings. There may well be other relevant documents which have not been exhibited. Leave should be given, discovery made and the matter fully argued.

Decision

9. I am satisfied that there is no defence to this claim and the Plaintiff is entitled to judgment. There were four conditions precedent laid down in May 1985 and repeated in the September 20th documents. Two of those have not been met. Some three months has now gone by and there is no evidence at all as to when the conditions will be met, if ever, and why there has been this delay. In particular it is extraordinary that the approval of the Board of Manilabank has not been obtained if it does intend to assume these loans. No time limit was liad down but in its absence reasonable time is to be implied. Considering the amount involved and the absence of any reasonable explanation that limit has been exceeded. There has been no accord and satisfaction of the Defendant's debt by its assumption by Manilabank.

10. There will be judgment for the Plaintiff for the sum of $US1,008,697.92 together with interest on $US1,000,000 at 10 7/16% from 12th September 1985 until payment, credit to be given for any interest paid.

11. The Plaintiff is to have its costs here and before the Master.