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Note: Banca Intesa (Issuer) issued and honored presentations under five LCs at the request of Forward Industry LTD (Applicant). Issuer provided Applicant with monthly account statements detailing the principal and interest due as well as demand letters regarding Applicant's indebtedness.

After several unsuccessful attempts to obtain partial repayments, Applicant and Issuer entered into a settlement agreement that required Applicant to repay a lesser sum of HK$1,100,000 in four installments. The agreement included a condition in the event of default providing that failure to repay would allow Issuer to terminate the agreement and declare the full amount, less payments made, due with interest to accrue at the US dollar prime lending rate plus 4 percent.

When Applicant breached the settlement agreement, Issuer sued Applicant for reimbursement of the full amount due, US$252,065.28, as principal and US$27,830.89 as interest. In defense, Applicant claimed that (1) Issuer did not provide a clear basis of indebtedness and detailed calculation, (2) there was no basis for the interest rate at four percent over the bank's US dollar prime lending rate, and (3) the claim should only be for HK$1,100,000, not the principal and interest as claimed.

The High Court of the Hong Kong Special Administrative Region Court of First Instance, Deputy High Court Judge Chan awarded summary judgment to Issuer. He ruled that the Applicant had been advised of the amounts due in principal and interest through monthly statements and demand letters which Applicant acknowledged through its letters and partial payment. Because Applicant did not meet the terms and conditions of the settlement agreement, Issuer was permitted to revoke the settlement agreement's lower sum of HK$1,100,000 and claim the full amount.

[JEB/rlf]

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