In Kotonou v National Westminster Bank plc, the claimant's company entered into a loan with the defendant. It was initially secured by a standby letter of credit procured by two individuals through their bank. The letter of credit was null and void if payment was not requested under it by a specified time which was extended until 16 March 2000. No call was made on the letter of credit which then lapsed. The claimant then had to provide a personal guarantee to secure the loan. That guarantee was itself the subject of legal proceedings brought by the defendant to enforce it. The guarantee was ordered to be set aside due to misrepresentation on behalf of the defendant.
The company went into liquidation having previously entered into a deed of assignment in favour of the claimant. The claimant, as assignee, brought proceedings against the defendant for alleged breaches of contract, common law duty of care and fiduciary duty in relation to the various extensions of the standby letter of credit and breach of common law duty of care said to be owed to him personally.
The defendant sought summary judgment or strike out as an abuse of process. It argued the issues in relation to the company's claims had been litigated previously in the guarantee proceedings. It would bring the administration of justice into disrepute and be unfair to the defendant to litigate them again. The judge at first instance agreed and struck out the particulars of claim.
On appeal the court held that when considering arguments as to abuse of process, it should be reluctant to interfere with the judge's decision unless the judge took into account immaterial factors, or failed to take into account material factors, erred in principle or arrived at an impermissible or incorrect decision. There was no such issue in this case. Additionally, the judge confirmed that ordinarily, there is no arguable case for saying that a bank owes a duty, at common law or in equity, to a debtor to make a call on a standby letter of credit. That being so, no such duty could be owed to the claimant personally either.
Things to consider
The courts will take a fairly robust attitude where one party attempts to re-litigate issues that the court has already determined. The factors stated above indicate that the threshold a litigant has to cross to convince the court to re-litigate an issue is high.