Kotonou v National Westminster Bank Plc

Relitigating factual issues determined after a full trial may constitute an abuse of process even where neither cause of action estoppel nor issue estoppel applies. The question is whether, in all the circumstances, relitigation would be manifestly unfair or bring the administration of justice into disrepute. The assessment is fact-sensitive and requires an intense focus on the particular case.

On summary judgment, the claimant must have a real, rather than merely theoretical, prospect of success. A creditor ordinarily owes no duty to a debtor concerning whether or when the creditor exercises rights over security for the debt. That principle applied to a standby letter of credit. No contrary contractual, tortious or fiduciary duty arose on the facts.

National Westminster Bank had lent money to Olympic Resources & Services Plc against a standby letter of credit. The letter of credit expired without being called. In earlier proceedings, the claimant successfully set aside a personal guarantee given to the bank, but the Deputy Judge made factual findings rejecting the claimant’s account of the bank’s involvement with the security.

The claimant then brought assigned and personal claims alleging contractual, tortious and fiduciary duties concerning the standby letter of credit. The Master struck out the Particulars of Claim as a collateral attack on the earlier findings and adjourned the bank’s summary judgment application. The claimant appealed, and the bank sought summary judgment and relied on Henderson v Henderson abuse. The central issues were whether the new proceedings were abusive and whether the alleged duties had any real prospect of success.

1. Appeal dismissed. The Master’s decision that the Particulars of Claim constituted an abuse of process was upheld. The claimant’s allegations were flatly contrary to factual findings made after a full trial, following detailed evidence and submissions in which his counsel had specifically invited findings on the relevant matters. Requiring the bank to litigate those issues again would be manifestly unfair and would bring the administration of justice into disrepute.
2. The findings in the earlier proceedings were not merely provisional. The Deputy Judge had qualified only his view on the alleged duty of care, not the factual findings. The absence, or doubtful availability, of an appeal did not materially alter the abuse analysis. The principles governing abuse are broad and merits-based; the court must consider all the circumstances rather than apply a rigid rule.
3. Permission to amend was refused. The draft pleading repeated the allegations already struck out and did not provide the new, non-abusive pleading contemplated by the Master.
4. Summary judgment was given for the bank. A standby letter of credit is governed principally by its express terms. It was security for the underlying debt, not cash or a bank note. Although the issuing bank’s obligation was autonomous once conforming documents were presented, the creditor’s rights were distinct from those of a bailee of cash.
5. Applying the principles in China & South Sea Bank v Tan and related authorities, a creditor ordinarily owes no duty to a debtor as to whether or when it exercises rights over security. No special assumption of responsibility was available because the necessary factual allegations were abusive. No equivalent contractual term was implied, the banker-customer relationship was not fiduciary, and no trust arose over the letter of credit. The claimant therefore had no real prospect of establishing a duty to the company or to himself.

The claim was dismissed.

• High Court (Chancery Division): Master Teverson struck out the Particulars of Claim under CPR Part 3.4(2)(b), granted permission to appeal, and adjourned the summary judgment application.
• High Court (Chancery Division): Kotonou v National Westminster Bank Plc, [2010] EWHC 1659 (Ch). The appeal was dismissed, permission to amend was refused, summary judgment was given for the bank, and the claim was dismissed.