PAN BISBILDER (NIGERIA) LIMITED VS FIRST BANK OF NIGERIA LIMITED
June 25, 2025AQUA RIVER HOTEL VS UMO-ETUK R. BASSEY
June 25, 2025Legalpedia Citation: (2000-06) Legalpedia 63024 (SC)
In the Supreme Court of Nigeria
Holden at Lagos
Thu Jun 29, 2000
Suit Number: SC 174/98
CORAM
S.M.A. BELGORE, JUSTICE SUPREME COURT
I.L. KUTIGI, JUSTICE SUPREME COURT
A.I. KATSINA–ALU, JUSTICE SUPREME COURT
A.O. EJIWUNMI, JUSTICE SUPREME COURT
E.O. AYOOLA, JUSTICE SUPREME COURT
PARTIES
AFRICAN INSURANCE DEVELOPMENT CORPORATION
APPELLANTS
NIGERIA LNG LIMITED
RESPONDENTS
AREA(S) OF LAW
ARBITRATION – CONTRACT OF GUARANTEE- PERFORMANCE BOND- PRIVITY OF CONTRACT
SUMMARY OF FACTS
By writ of summons, the plaintiff sued the defendant in the High Court of Lagos State on the bond. By its Statement of Claim he averred that the contractor “did not duly perform, execute or complete the said contract within 91 days, and as a result the contract was terminated on April 2, 1991.The defendant applied to the High Court for a stay of the proceedings pending a reference to arbitration on the grounds that the subject matter of the action was governed by the arbitration clause. The trial Court granted the defendant’s application. The Plaintiff appealed to the lower court, the Court of Appeal allowed the Plaintiff’s appeal and set aside the decision of the High Court. Hence, the defendant appealed to the Apex court.
HELD
The court dismissed the appeal and held that the performance bond was a guarantee and that the appellant was not a party to the building contract and such could not be granted stay of proceedings.
ISSUES
Whether the defendant, who is neither a party to the arbitration agreement nor a derivative party, is entitled to a stay of proceedings in an action brought on the guarantee.
RATIONES DECIDENDI
A PERSON WHO CAN APPLY FOR STAY OF PROCEEDINGS IN FAVOUR OF ARBITRATION UNDER SECTION 5(1) OF THE ARBITRATION AND CONCILIATION DECREE (1988)
“It is evident from the provisions of section 5(1), that the applicant for a stay of proceedings must be a ‘party to the arbitration agreement’ and that the subject matter of the action must be “with respect to any matter which is the subject of an arbitration agreement.” – Ayoola J.S.C.
WHEN THE RIGHT OF ACTION ARISES AGAINST A GUARANTOR
” The right of action against a guarantor arises on a default by the principal debtor and not on a finding of liability against such debtor .”- Ayoola J.S.C.
THE DOCTRINE OF PRIVITY OF CONTRACT
“Privity of contract is still very much a part of our law of contractual liability. A third party who was not privy to a contract cannot ordinarily be held responsible for the damages incurred by default of one of the parties.”- Belgore J.S.C
PRIVITY OF CONTRACT-ONLY A PARTY TO A CONTRACT CAN SUE
“As a general rule only a person who is a party to a contract can sue on it; a fortiori, only such party can take the benefit of an arbitration clause contained therein.”PER A.I. KATSINA-ALU, JSC
CASES CITED
Trafalgar House Construction (Regions) Ltd v. General Surety and Guarantee Co Ltd (1995)3 All ER 737
Ikpeazu v. African Continental Bank Ltd (1965) N.M.L.R 374;
Dunlop Pneumatic & Company Ltd v. Selfridge & Co. Ltd (1914 – 15) ALL E.R Rep. 333.
Ikpeazu v. African Continental Bank Ltd (1965) N.M.L.R 374
Dunlop Pneumatic & Company Ltd v. Selfridge & Co. Ltd (1914 – 15) ALL E.R Rep. 333
STATUTES REFERRED TO
The Arbitration And Conciliation Decree (1988)
