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

Manchester District Registry

Judgment by:
Atkin L.J.

ATKIN L.J. read the following judgment: This case raises the question whether the customer of a bank may sue the banker for the balance standing to the credit of his current account without making a previous demand upon the banker for payment. It is unnecessary to recapitulate the circumstances which raise this issue in this case. It is sufficient to state that upon the hearing of a summons for particulars on March 16, 1920, the defendants undertook to limit their causes of action to those arising on or before August 1, 1914, and that at that date no demand for the balance had been made to the bank.

The question seems to turn upon the terms of the contract made between banker and customer in ordinary course of business when a current account is opened by the bank. It is said on the one hand that it is a simple contract of loan; it is admitted that there is added, or superadded, an obligation of the bank to honour the customer's drafts to any amount not exceeding the credit balance at any material time; but it is contended that this added obligation does not affect the main contract. The bank has borrowed the money and is under the ordinary obligation of a borrower to repay. The lender can sue for his debt whenever he pleases. I am unable to accept this contention. I think that there is only one contract made between the bank and its customer. The terms of that contract involve obligations on both sides and require careful statement. They appear upon consideration to include the following provisions. The bank undertakes to receive money and to collect bills for its customer's account. The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and during banking hours. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch, and as such written orders may be outstanding in the ordinary course of business for two or three days, it is a term of the contract that the bank will not cease to do business with the customer except upon reasonable notice. The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery. I think it is necessarily a term of such contract that the bank is not liable to pay the customer the full amount of his balance until he demands payment from the bank at the branch at which the current account is kept. Whether he must demand it in writing it is not necessary now to determine.

The result I have mentioned seems to follow from the ordinary relations of banker and customer, but if it were necessary to fall back upon the course of business and the custom of bankers, I think that it was clearly established by undisputed evidence in this case that bankers never do make a payment to a customer in respect of a current account except upon demand.

The contention of the plaintiffs appears to me to ignore the fact that the contract between banker and customer contains special terms, and cannot in its entirety be expressed in the phrasing of an ordinary indebitatus count. A simple promise to pay upon an executed consideration creates a debt, and the creditor may sue without notice. "It is clear that a request for the payment of a debt is quite immaterial, unless the parties to the contract have stipulated that it shall be made; if they have not, the law requires no notice or request; but the debtor is bound to find out the creditor and pay him the debt when due": per Parke B. in Walton v. Mascall . ^[F63] The question is in every case whether the parties have stipulated that a request shall be made. In the case of a note made payable on demand it is clear that the words "payable on demand" do not make a demand a term of the contract: see Norton v. Ellam ^[F64] , a decision that on a note payable with interest on demand the Statute of Limitations ran from the date of the note. Parke B. says ^[F65] : "It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action. 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. The debt which constitutes the cause of action arises instantly on the loan." On the other hand a note payable on demand at a particular place does contain a stipulation in the contract that demand shall be made modo et forma, and no action will lie without such a demand: see now Bills of Exchange Act, 1882, s. 87, sub-s. 1. It has been said that a demand can only be necessary where the contract is a collateral promise to pay, meaning thereby a promise such as that of a surety.

This is too narrow a view, and I am inclined to think has received countenance from a misreading of the words of Alderson B. in Norton v. Ellam ^[F65] , where he adds to the judgment of Parke B.: "It must be so unless there is something to show that a demand is to be a collateral matter"; which I think means is stipulated for as qualifying the promise to pay. The use of the word "collateral" and its true explanation can be seen in the case of Birks v. Trippet . ^[F66] There the principal case was an action in assumpsit , which declared that the plaintiff and defendant had submitted differences to arbitration, and that the defendant had promised the plaintiff that if the defendant did not perform the award he would pay 40l. if he should be thereunto requested. Saunders, of counsel for the defendant, took objection to the declaration "that the plaintiff (in his declaration) had not laid any request of the penalty of 40l.," and he argued that there was a difference between a mere duty and a collateral sum: "For where a mere duty is promised to be paid upon request, as if in consideration of all moneys lent to the defendant, he promised to pay them again on request, no actual request is necessary, but the bringing of the action is a sufficient request. But otherwise it is on a promise to pay a collateral sum on request, for there an actual request ought to be made before action brought. And so was the opinion of the whole Court. And thereupon judgment was given for the defendant." And Serjeant Williams, in his note, cites a number of cases and then says: "For the request is parcel of the contract, and must be proved; and no action arises until a request be made."

The question appears to me to be in every case, did the parties in fact intend to make the demand a term of the contract? If they did, effect will be given to their contract, whether it be a direct promise to pay or a collateral promise, though in seeking to ascertain their intention the nature of the contract may be material. In the case of such a contract as this, if I have correctly stated the manifold terms of it, it appears to me that the parties must have intended that the money handed to the banker is only payable after a demand. The nature of the contract negatives the duty of the debtor to find out his creditor and pay him his debt. If such a duty existed and were performed, the creditor might be ruined by reason of outstanding cheques being dishonoured. Moreover, payment can only be due, as it appears to me, at the branch where the account is kept, and where the precise liabilities are known. And if this is so, I apprehend that demand at the place where alone the money is payable must be necessary. A decision to the contrary would subvert banking business. I am glad to think that, so far as I can ascertain, the decisions in the American Courts are uniformly to the same effect as our present judgment.

The practical bearing of this decision is on the question of the Statute of Limitations. Since the case of Pott v. Clegg ^[F67] in 1847 it has been laid down in text-books that, in the case of a current account, the statute runs from the time of the money being deposited with the banker. But if that case is looked at, it is plain that it was decided upon the pleadings, the sum in question being claimed to be set off for money lent by the defendant's testator to the plaintiff's predecessor in title. It is stated that the majority of the Court were of opinion that money in the hands of the banker is merely money lent, with the superadded obligation that it is to be paid when called for by the draft of the customer. The Lord Chief Baron was of opinion that it was a question for the jury 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. The Lord Chief Baron delivered the judgment of the Court, and it is plain from his language that he could not have done so had not the decision been confined to the pleading point. The only other direct authority is the decision of Lord Lyndhurst L.C. in Foley v. Hill . ^[F68] The suit was for an account, and I am not certain that in dealing with the Statute of Limitations Lord Lyndhurst was not dealing with those words in the statute that deal with actions of account. The right to such an action may well accrue before a debt becomes payable. But on the assumption that the Lord Chancellor decided that the statute had run against a claim in debt or assumpsit , yet inasmuch as that decision was taken to the House of Lords ^[F69] and affirmed there by all the Lords present, including Lord

Lyndhurst himself, upon one only of the grounds relied upon in the judgment below, the point as to the Statute of Limitations being expressly reserved, I do not think that we are bound to treat the whole of Lord Lyndhurst's judgment as binding upon us. It may be noted that the decision of the Court of Exchequer in Pott v. Clegg ^[F70] had been given between the dates of the decision of Lord Lyndhurst in Foley v. Hill ^[F71] and the hearing in the House of Lords. ^[F72] The decision in the latter case in the House of Lords is confined to the point that the banker is debtor to his customer and not trustee. I do not think it safe to rely upon the language used by the Lord Chancellor and Lord Brougham on the subject of demand and request, though the words used tend to support the contention of the present appellants.

The result of this decision will be that for the future bankers may have to face legal claims for balances on accounts that have remained dormant for more than six years. But seeing that bankers have not been in the habit as a matter of business of setting up the Statute of Limitations against their customers or their legal representatives, I do not suppose that such a change in what was supposed to be the law will have much practical effect. It was suggested in argument that the effect of our decision will be to alter the facilities given to an execution creditor to attach his debtor's bank account in garnishee proceedings. This appears to be a mistake. The provisions of Order XLV. apply to debts owing or accruing from the garnishee, and this expression includes debts to which the judgment debtor is entitled though they are not presently payable: see the decision of the Court of Appeal in O'Driscoll v. Manchester Insurance Committee . ^[F73] The service of the order nisi binds the debt in the hands of the garnishee - that is, creates a charge in favour of the judgment creditor. If the bank disputes that the amount is payable, there is ample power to provide for a demand being made before an order for payment is made. Possibly the order nisi in itself operates as such a demand.

Finally it is perhaps unnecessary to say that the necessity for a demand may be got rid of by special contract or by waiver. A repudiation by a bank of the customer's right to be paid any particular sum would no doubt be a waiver of any demand in respect of such sum.

For these reasons, I am of opinion that the appeal should be allowed, and that judgment should be entered for the defendants on the claim with costs.

Appeal allowed .