CASE DIGEST - BANKING: BANK GUARANTEE; AUTONOMY OF CONTRACT OF BANK GUARANTEE WILL NOT APPLY WHEN THERE IS FRAUD

STANDARD CHARTED BANK NIGERIA LIMITED v. REGAN RENAISSANCE LIMITED

COURT OF APPEAL (LAGOS DIVISION)

(DANIEL-KALIO; SIRAJO; BANJOKO, JJ.CA)

Reagan Renaissance Limited (Respondent) a licensed importer of cement, entered into a contract with a foreign company known as He Trading Malta Limited, for the supply of 300,000 metric tonnes of bagged ordinary Portland cement into Nigeria. The supply was to be made in September, October, or November 2009. Pursuant to that contract, the Respondent entered into an agreement with Standard Chartered Bank Nigeria Limited (Appellant), to issue a Bank Guarantee on its behalf, to HC Trading Malta Limited in the initial sum of, $1 million, which sum was later increased to $2.36 million, so as to cover the financial exposure of HC Trading Malta Limited and any attendant demurrage costs. As consideration for issuing the said Bank Guarantee, the Respondent provided an equal cash collateral in its fixed deposit account with the Appellant. HC Trading Malta Limited however defaulted in supplying the cement. Within the supply period of the cement by HC Trading Malta Limited, the Respondent was informed that the Federal Government of Nigeria had banned the importation of bagged cement into Nigeria. As a result of the ban, the Respondent instructed the Appellant to cancel the Bank Guarantee. The Appellant however refused to do so and on 31/12/2009, notified the Respondent that it had debited its account in the sum of N47,068,875 in favour of HC Trading Malta Limited in adherence to the Bank Guarantee issued by the Appellant. The Respondent, by a letter, immediately demanded a refund of the debited money, which the Appellant refused to make. Consequently, the Respondent at the High Court (trial Court) prayed for an order directing the Appellant to credit the Respondent's account with the sum of N47,068,875.00 and interest on the sum till judgment and thereafter, till the final liquidation of the judgment sum. The Respondent also sought damages to the tune of N100,000,000.00. At the conclusion of the trial, the trial Court acceded to the claims of the Respondent. Dissatisfied with the decision of the trial Court, the Appellant appealed to the Court of Appeal. One of the issues for determination was Whether the lower Court erred in law when it found that the Appellant's debit of the Respondent's account in the sum of N47,068,875.00 was wrongful, without making any finding that the Appellant was in breach of the terms of the contract dated 7th of September, 2009.

The learned Senior Counsel to the Appellant contended that the purported basis of the Respondent's entitlement to the reliefs sought at the trial Court was the ban on the importation of bagged cement into Nigeria by the Federal Government of Nigeria. It was submitted that the alleged breach of contract between the Respondent and HC Trading Malta Limited had nothing to do with the performance of the terms of the Bank Guarantee issued by the Appellant as it is a distinct and separate contract, and does not give the trial Court the legal or factual basis to hold that the contract between the parties was frustrated by the ban on importation of cement into Nigeria.