N. Joachimson (A Firm Name) v. Swiss Bank Corporation.
[1921] 3 K.B. 110(Judgment by: Warrington)
N. Joachimson (A Firm Name)
v Swiss Bank Corporation.
Judges:
Bankes,
Warrington,Atkin L.JJ.
Subject References:
Banker
Customer
Current Account
Debt
Necessity for Demand
Implied Term
Cause of Action
Judgment date: 11 March 1921
Manchester District Registry
Judgment by:
Warrington
WARRINGTON L.J. read the following judgment [after stating the facts and the defences raised]: The question is: In the case of money to the credit of a current account with a banker, is the existence of an actual demand an ingredient in the cause of action? In the text-books the question is answered in the negative, and it is said that the Statute of Limitations applies to a balance left untouched for six years before action: see for example Halsbury's Laws of England, tit. Bankers and Banking, s. 1196, p. 586. This view appears also to have been accepted as correct by Lord Esher M.R. and Lindley L.J. in Atkinson v. Bradford Building Society [F49] , and by North J. in In re Tidd [F50] , but in neither of those cases did the point arise for decision.
The cases usually cited in support of the above statement are Foley v. Hill [F51] , Pott v. Clegg [F52] , and Foley v. Hill . [F53] I have mentioned them in the above order, because it is the order in which the several judgments were given, Pott v. Clegg [F52] having been decided between the judgment of Lord Lyndhurst L.C. in Foley v. Hill [F51] and the decision of the House of Lords in the same case. [F53] In Foley v. Hill [F51] the plaintiff instituted a suit in equity for an account. The defendants were bankers who had received from the plaintiff many years before suit a sum of money for which they agreed to pay 3 per cent. interest, but of this two payments only had been made, both more than six years before suit, and no interest had been credited for more than six years. The plaintiff insisted that the transaction was not one of debtor and creditor, but one of trustee and cestui que trust , and that the Statute of Limitations did not apply. The Lord Chancellor, having held that the case was one merely of a loan to the defendants to be repaid with 3 per cent. interest, said [F54] : "That was the simple transaction between them, and if this were a case at law, a plea of the statute would be a sufficient answer, unless there were some special circumstances to take the case out of the statute." He then held that it was also a sufficient answer in equity, and that in that case there were no special circumstances to take the case out of the statute. There was another ground relied upon by the Lord Chancellor [F55] as a sufficient answer to the suit - namely, want of equity - the account being so simple as not to be the proper subject for a bill in the Court of Chancery.
The Lord Chancellor did not consider whether the accepted course of business as between bankers and their customers has not introduced into their relation a modification of that of an ordinary borrower and lender. Still there is undoubtedly an expression of opinion that the debt was barred by the statute, based on the assumption that the claim was an ordinary one for money lent, but the point did not really arise for decision, inasmuch as there was ample ground without it for dismissing the bill.
The next decision in point of time was Pott v. Clegg . [F56] That case has been regarded as having decided that the contract between banker and customer is the ordinary one for money lent, and that the statute runs from the receipt of the money by the banker. But when it is examined it will be found that the customer, who desired to contend, and did contend, that the contract between banker and customer was a special one under which a demand was essential to the cause of action, had not raised the point on his pleadings: see per Rolfe B., and the judgment of the Court delivered by Pollock C.B. proceeded on this footing. It is true that the majority of the Court were of opinion that money in the hands of a banker is merely money lent, but the Chief Baron expressed considerable doubt "whether there is not a special contract between the banker and his customer as to the money deposited, which distinguishes it from the ordinary case of a loan for money." This case again is not in reality a decision on the point.
In Foley v. Hill , before the House of Lords [F57] , the decision turned upon the question, raised and solemnly argued, whether the relation of banker and customer was not that of trustee and cestui que trust rather than that of debtor and creditor. The learned Lords were all of opinion that it was the latter, and that the Lord Chancellor was right in dismissing the bill on the ground of want of equity. Again, therefore, the point as to the true nature of the contract and of the banker's obligation did not arise for decision. Lord Cottenham L.C. however did use expressions which seem to me, at all events, to leave open the question which we have to decide. He said [F58] the banker "is of course answerable for the amount" - namely, the money placed in his custody - "because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands." He in terms refused to deal with the question as to the application of the Statute of Limitations. Lord Brougham also expressly abstained from expressing any opinion upon the point, but he did, in the course of his speech, describe in terms almost identical with those used by the Lord Chancellor the nature of the banker's obligation. Lord Campbell confined his speech to the point as to want of equity, and Lord Lyndhurst added nothing material to his previous judgment in the Court of Chancery.
There is one other expression of opinion to which it is useful to refer. In Schroeder v. Central Bank of London [F59] , the question arose whether a cheque was an assignment of a corresponding part of the drawer's credit balance. After deciding this question in the negative for reasons not material to the present case, Brett J. said this [F60] : "This is not a case of the drawer going himself and demanding all the money in his bankers' hands, and I am myself inclined to think that it might be put in this way: that there was no debt on which an action against the defendants could be founded until a sum was demanded, and that when the cheque was drawn there was no debt which could be assigned, and consequently there can be no debt owing by the defendants to the plaintiffs." This is, so far as it goes, the expression of an opinion in favour of the view contended for by the defendants.
In this state of the authorities it seems to me that the question we have to decide has been left open, so far as actual decision is concerned, with expressions of opinion both ways, and we must deal with it accordingly. It is, of course, well settled that in the ordinary case of money lent "the debt which constitutes the cause of action arises instantly on the loan": per Parke B. in Norton v. Ellam [F61] ; and just before the same learned judge said: "There is no obligation in law to give any notice at all; if you choose to make it part of the contract that notice shall be given, you may do so;" and the real question is whether or not in the special case of banker and customer the obligation to give notice is part of the contract between them.
There are some points in reference to the relation of banker and customer which seem to me to indicate that such obligation is part of the contract. If the general rule above mentioned were applicable, the banker would be bound to seek out his customer and pay him, and the customer would be bound at any time and without notice to receive the amount due, but it is well settled that a banker is not at liberty to close an account in credit by payment of the credit balance without giving reasonable notice, and making provision for outstanding cheques. This restriction on a banker's liberty to discharge his debt, seems to me inconsistent with an obligation on his part to pay without demand. Of course, if the customer requires payment, he waives his right to receive notice, and then the banker's liability would immediately arise. There was evidence in the present case that bankers never in fact pay without demand, and though this by itself may not be evidence of a custom binding on both parties, it at all events shows that bankers and customers habitually act on the assumption that notice shall be given on the one side as well as on the other.
Again, there are mutual obligations on both banker and customer in reference to the payment and drawing of cheques:
London Joint Stock Bank v. Macmillan . [F62] Cheques drawn on one branch of a bank are not payable at another. Bankers are not required to pay cheques except at the banking house and in banking hours.
All these matters seem to me to distinguish the contract between banker and customer from the ordinary case of a loan of money, and having regard to the state of the authorities I think we are at liberty to hold, and ought to hold, that a demand, either by the issue of a writ or otherwise, is an essential ingredient in the cause of action, and that without such demand no cause of action accrues. In the present case there was no demand on or before August 1, 1914. It may be suggested that the view we take is inconsistent with the operation of a garnishee order upon a banking account. I do not think so. In my opinion, the service of the order nisi would be a sufficient demand.
In my opinion, therefore, no cause of action had accrued on August 1, 1914, and the action was not maintainable. For these reasons I am of opinion that the appeal succeeds, and judgment should be entered for the defendants with costs here and below. The counterclaim will be dealt with as Bankes L.J. has said.