David v. Goliath: Why the Smaller Party Doesn't Always Lose
There is a particular kind of dread that comes with a demand letter on bank letterhead. The language is heavy, the deadlines are short, and the message is hard to miss. We are big, we are well-resourced, and we will not be argued with. Many people quietly decide that fighting back is futile.
It usually isn't. Hong Kong courts do not simply side with the bigger party because it is bigger. Banks and financial institutions, like everyone else, must prove their case on the evidence and within the confines of the law. When they fall short, they lose, and the size of their balance sheet does not save them.
We recently acted for a client who received a demand from a bank under a secured facility. Without our client’s consent, the bank unilaterally waived interest accruing on a separate banking product to which our client was entitled and justified the waiver as if it were an actual payment by way of set-off.
We disputed the bank’s unconscionable approach, relying on established principles of Hong Kong law and highlighting applicable cross-jurisdictional regulatory obligations governing contractual fairness and banking conduct. After considering the legal and regulatory risks, the bank swiftly moved to settle the matter on terms favourable to our client.
The same principle runs through the seminal case of Chang Pui Yin & Ors v Bank of Singapore Ltd (CACV 194/2016). In this case the Court of Appeal upheld a finding that a bank was liable for the investment losses of its customers, a couple with limited investment experience who had been sold products that exceeded their risk appetite. The Court refused to allow the bank to hide behind the standard non-reliance clauses and risk disclosure statements buried in its own paperwork and held that those clauses were contrary to the Unconscionable Contracts Ordinance (Cap. 458) and Control of Exemption Clauses Ordinance (Cap. 71). A bank cannot draft its way out of duties it has taken on. Nor can a bank rely on its own fine print to escape its real obligations.
It is worth adding that the decision turned closely on its own facts, and that regulatory practice has since tightened. The underlying message endures: the documents a bank puts in front of you are not automatically the last word, and they will be scrutinised by the courts.
What This Means For You
The way a bank frames your situation in a demand letter is not the final word on what you owe or what it is entitled to. If you have received a demand from a bank, the worst thing you can do is panic, sign whatever is put in front of you, or assume there is no point in fighting back. The sooner you take advice, the more choices you have, whether that means negotiating, settling, defending, or even bringing a claim of your own.
How We Can Help
Jal N. Karbhari has acted for individuals and businesses in disputes against major banks and financial institutions, including cases where the odds, on paper, looked daunting. As our own recent work shows, a large corporate opponent does not always get its way, and the opening letter is rarely the last word.
If you are facing a demand from a bank, the right time to take advice is now, before deadlines harden and options narrow.
"Need legal help with a banking or commercial dispute? Jal N. Karbhari, Solicitors & Notary, will connect you with the right specialist. Email: inquiries@karbharilaw.com | Phone: +(852) 2367 7577 | Fax: +(852) 2367 7897"
Disclaimer: This article is for general informational purposes only and does not constitute legal advice or create a solicitor-client relationship. References to past matters are made on a general and anonymised basis and should not be taken as indicative of the outcome of any particular case. For advice tailored to your situation, please consult a qualified legal professional.