Read the full judgment text of CACV 000283/2002 on BabelCite. This Court of Appeal judgment was delivered on 23 May 2003 before Woo JA, Cheung JA, Chung J.
Civil appeal – banking – mortgage – legal charge with personal covenant to pay all outstanding indebtedness – facility letters acknowledging limited use of banking facilities – whether facility letters limited mortgagor's liability – collateral or composite agreement – Bank of China (Hong Kong) Ltd v Fung Chin Kan [2003] 1 HKLRD 181 distinguished – whether material variation discharged mortgages – whether bank owed duty to mortgagor to assist in discharge of mortgage upon notice of recall – construction of facility letters and legal charges – pleadings – grounds of appeal not pleaded – High Court Ordinance s.15 and RHC O.59 r.11 – appeal dismissed with costs. The 4th defendant mortgaged two properties to the bank as security for banking facilities granted to the 1st defendant, with a personal covenant to pay in full all outstanding indebtedness. Two facility letters acknowledged that facilities would only be utilised up to $2.4 million and $8 million. The Court of Appeal held that the facility letters did not limit the 4th defendant's liability under the personal covenant, but merely recorded acknowledgement of the extent of banking facilities to be made available. The case was distinguishable from Fung Chin Kan on its facts, as there was no evidence of an agreement between the 1st and 4th defendants limiting the 4th defendant's risk exposure, nor of the bank's knowledge of any such limit. The variation argument also failed because the total facility amount had not been exceeded (unchallenged evidence of bank officer). No legal duty arose on the bank to assist the mortgagor in discharging the mortgage without full repayment of the loan. The three grounds of appeal, largely not pleaded at trial, were without merit. Appeal dismissed with costs.
Legal issues: Whether two facility letters limited the 4th defendant's liability under the legal charges · Whether material variation of mortgage terms discharged the mortgages · Whether bank owed a duty to the mortgagor to assist in discharge of mortgage upon recall notice
Outcome: Appeal dismissed with costs.
Cited by 1 case