CASE DIGEST - BANKING; INDEMNITY CONTRACT: LIABILITY ON INDEMNITY: WHAT MUST A BANK PROVE TO SUCCEED IN AN ACTION FOR LIABILITY ON INDEMNITY?

CASE DIGEST - BANKING; INDEMNITY CONTRACT: LIABILITY ON INDEMNITY: WHAT MUST A BANK PROVE TO SUCCEED IN AN ACTION FOR LIABILITY ON INDEMNITY?

MACT SECURITIES LTD. & ANOR. v. GUARANTY TRUST BANK PLC.

COURT OF APPEAL (LAGOS DIVISION, NIGERIA)

The case of Guaranty Trust Bank (Respondent) at the High Court of Lagos State (trial court) that resulted in this appeal was that by an executed indemnity contract, the 1st Appellant undertook to indemnify the Respondent against all actions, claims or proceedings which may be brought or made against the Respondent by reason of clearing the third party cheques through the 1st Appellant's account with the Respondent and also to pay the Respondent on demand, all payments, losses and expenses suffered by the Respondent arising therefrom. Upon the strength of the said indemnity, the Respondent cleared two bank drafts, upon presentation by the Appellants, in the value of N70,000,000.00 and N50,000,000.00 respectively, made in favour of Oyo state Government to be cleared through the 1st Appellant's account domiciled with it. Sometimes in November 2013, the Respondent received a complaint from the Economic and Financial Crimes Commission (EFCC) that the aforementioned cheques were cleared without the authorization of Oyo State Government and requested that the Respondent furnish the commission with the instruction from Oyo State Government to clear the cheques. In response, the Respondent stated that the cheques were cleared based on the indemnity executed by the Appellants in favour of the Respondent.