Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad [1989] 1 Lloyd’s Rep. 556

Facts: In 1983 the defendants (MMC) formed MMC Metals Ltd (Metals) a wholly owned subsidiary to operate as a ring-dealing member of the London Metal Exchange. Metals required extra funding and there was in due course an acceptance credit/multi currency cash loan facility made available by the plaintiffs (K.B.) to Metals. On 21 August 1984, as part of the facility granted to Metals to a maximum of $5,000,000, MMC furnished to K.B. a letter of comfort which provided inter alia: ‘It is our policy to ensure that the business of MMC Metals Limited is at all times in a position to meet its liabilities to you under the above arrangements.’ Subsequently the maximum amount of the facility was increased to $10,000,000 and a second and operative letter of comfort dated 7 May 1985 was furnished by MMC to K.B. The tin market collapsed and Metals ceased trading. On 11 November K.B. terminated the facility and demanded immediate payment of all outstanding bills, loans and other sums payable which in the circumstances would not be forthcoming from Metals. On 12 November 1985 K.B. drew MMC’s attention to Metals’ default, referred to the letter of comfort and requested MMC to ensure that K.B. received the payments due to them. By telex dated 3 December 1985 MMC contended that the letter of comfort was not contractual and that MMC had not given any assurances that Metals would at all times be kept in a position to meet its liabilities to K.B.