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Kleinwort Benson (KB) v Malaysia Mining Corporation BHD (MMC BHD) [1989] 1 WLR 379 Court of Appeal

Malaysia Mining Corporation Metals Ltd (MMC Metals) was a wholly owned subsidiary of the defendant, MMC BHD. MMC Metals approached the claimant KB Bank for a loan. MMC Metals was a relatively newly formed company lacking in the size and resources of MMC BHD. The bank approached MMC BHD asking if they would act as guarantor for the loan. MMC refused to act as guarantor but stated they it was their company policy to ensure that their subsidiaries are always in a position to meet their debts. In reliance of this letter of comfort the bank advanced money to MMC Metals. MMC Metals subsequently went into administration having not paid the loan. KB brought an action against MMC BHD to recover their loss based on the assurance given in the comfort letter.

Held:

The comfort letter had no legal effect. The fact that MMC BHD had refused to act as guarantor demonstrated they did not intend to be legally bound. The comfort letter referred to company policy at that time. There was nothing to stop the company changing its policy.
 
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