N. Joachimson (A Firm Name) v. Swiss Bank Corporation.
[1921] 3 K.B. 110(Decision by: Bankes)
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
Decision by:
Bankes
March 11. BANKES L.J. read the following judgment. The material facts of this case are as follows: Before and until August 1, 1914, three persons had carried on business in Manchester in partnership under the firm name of N. Joachimson. On that date one of the partners died, and as a result the partnership was automatically dissolved. The plaintiff in the present action was one of the three partners. He is a naturalized Englishman, at all material times residing and carrying on business in England. The third partner on the outbreak of war became an alien enemy. The partnership banked with the branch of the appellant bank in London. On August 1, 1914, the amount standing to the credit of the partnership current account was something over 2300l. On June 5, 1919, the plaintiff commenced the present action in the name of N. Joachimson (Manchester), claiming payment of the sum standing to the credit of the account of the partnership. The action has had a chequered career during the preliminary stages, but eventually it has taken the form of an action by the plaintiff in the name of N. Joachimson, "a firm name," claiming for the purpose of winding up the affairs of the partnership to recover the amount standing to the credit of the partnership on August 1, 1914, and asserting that the cause of action on which the plaintiff relied was one which accrued on August 1, 1914, "for money lent by the plaintiffs to the defendants as bankers, or alternatively for money had and received by the defendants for the use of the plaintiffs." To the action as thus constituted several objections were taken. With regard to the form of the action it was said that the facts did not bring it within Order XLVIIIA., r. 1, so as to allow of the action being brought in the firm name.
With regard to the substance of the action it was said that on August 1, 1914, there was no accrued cause of action for the amount standing to the credit of the partnership on that date, because no demand had been made upon the defendant bank for payment on or before that date. It was also said that even if there was a cause of action on August 1, 1914, it was not a continuing cause of action at the date of the writ. There was also a set-off and counterclaim. All these points were dealt with by Roche J. in the Court below. Having regard to the view I take on the question whether there was an accrued cause of action on August 1, 1914, it is not necessary to refer to any of the other points, and I express no opinion and give no decision upon them.
The question whether there was an accrued cause of action on August 1, 1914, depends upon whether a demand upon a banker is necessary before he comes under an obligation to pay his customer the amount standing to the customer's credit on his current account. This sounds as though it was an important question. In a sense no doubt it is, but it is very rarely that the question will in practice arise. In most of the cases in which the question is likely to arise, even if a demand is necessary to complete the cause of action, a writ is a sufficient demand. It is only therefore in the unlikely case of a banker pleading the Statute of Limitations, or in a case like the present where the facts are very special, that the question becomes important. In the present case the writ was not issued till June 5, 1919. To succeed in the action, the plaintiffs had to prove a cause of action existing long before that date - namely, on August 1, 1914. Roche J., while recognizing that at first sight the conclusion as a matter of business seemed startling, gave judgment in favour of the plaintiffs, holding that the point had been decided in Foley v. Hill [F27] and Pott v. Clegg . [F28] There is no doubt that the general opinion of these decisions, as accepted in some reported cases and as expressed in the text-books, is in accordance with the view taken of them by Roche J. As illustrations I refer to In re Tidd [F29] , where counsel for the plaintiff admitted that in the case of money paid into a bank on current account the law is that the amount held by the bank is a simple debt in respect of which time runs under the Statute of Limitations without demand, and he cited as authority for the proposition Pott v. Clegg [F28] and Foley v. Hill [F27] in the House of Lords. North J. apparently accepted the proposition without any discussion of these cases.
In Halsbury's Laws of England, vol. xix., tit. Limitation of Actions, s. 72, the same cases are cited as an authority for the proposition that "in the case of money on current account, time runs from the payment in."
It is necessary, therefore, to consider very carefully what those cases really did decide. Before proceeding to do this, it is helpful to bear in mind what the general law is with reference to payments to be made "on demand." In Walton v. Mascall [F30] Parke B. states the law thus: "Now 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." And again in Norton v. Ellam [F31] the same learned judge says: "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." In every case, therefore, where this question arises the test must be whether the parties have, or have not, agreed that an actual demand shall be a condition precedent to the existence of a present enforceable debt. In the ordinary case of banker and customer their relations depend either entirely or mainly upon an implied contract. The questions for decision in the present case must therefore be: (1.) whether the cases to which reference was made in the Court below did decide that the relation of banker and customer is such as to negative any implied condition that the making of an actual demand is a condition precedent to the bringing of an action to recover money lent to the banker by the customer on current account; and (2.) whether, if they did not so decide, such a condition should be implied. Pott v. Clegg [F32] is a decision of the Court of Exchequer in 1847, and appears to have turned entirely upon the form of the pleading.
The argument of the Attorney-General in showing cause against the rule was rested as a separate point upon the fact that in the pleadings the balance due from the bank to the customer was treated as an ordinary debt for money lent. In support of the rule counsel argued that as between banker and customer a special relation existed, and further that a demand was necessary as a condition precedent to the accrual of a cause of action; but both Rolfe B. and Parke B. in the course of the argument pointed out that the latter point was not open on the pleadings. The judgment of the Court was delivered by Pollock C.B., who, after saying that the majority of the Court were of opinion that money deposited in a banker's hands is equivalent to money lent, went on to say that [F33] , even assuming that "there are peculiar circumstances in a banking account which distinguish it from any other, yet none of those circumstances appear on these pleadings, so as to justify us in considering this case differently from what we should if it were an ordinary case of money lent." The Chief Baron then goes on to express his own 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 decision does not, in my opinion, go further than recognizing that the relation of banker and customer is that of borrower and lender. It certainly does not establish the proposition that, though that is the relation, it may not be in part governed by special implied terms. Foley v. Hill was decided, in the first instance, by Lord Lyndhurst L.C. [F34] The main question in the action was whether an account between banker and customer, where the former pleaded the Statute of Limitations, was the proper subject for a bill in equity.
The Lord Chancellor, in giving judgment, refers to cases in which it had been decided that the relation of banker and customer was that of borrower and lender, and then proceeds [F35] : "Here there was a loan by Foley to the defendants, to be repaid with interest at 3 per cent.; 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." In the House of Lords [F36] the point mainly debated was again the question whether the plaintiff's claim was a fit subject for a bill in equity. In this connection the Law Lords expressed their opinions as to the ordinary relation existing between banker and customer, and those opinions are correctly summarized in the headnote as follows: "The relation between a banker and customer, who pays money into the bank, is the ordinary relation of debtor and creditor, with a superadded obligation arising out of the custom of bankers to honour the customer's drafts; and that relation is not altered by an agreement by the banker to allow the interest on the balances in the bank." The point which is raised in the present appeal was not mentioned or discussed, either in the Court below or in the House of Lords, and in my opinion the decision cannot be treated as an exhaustive definition of all the obligations arising out of the relation between banker and customer, or as ruling out the possibility of an implied term of that relation, requiring an express demand of repayment as a condition precedent to the right to sue the banker for the amount standing to the credit of the customer's current account. The recent decision of the House of Lords in London Joint Stock Bank v. Macmillan [F37] , approving Young v. Grote [F38] , affords one striking instance of an obligation implied in the relation of banker and customer to which no reference was made in Foley v. Hill . [F39]
Lord Haldane points out [F40] that: "Ever since this House in 1848 decided Foley v. Hill [F39] it has been quite clear that the relation between a banker and the customer whose balance he keeps is under ordinary circumstances one simply of debtor and creditor. But in other judgments, and notably by a later decision of this House, Scholfield v. Earl of Londesborough [F41] , it was made equally clear that along with this relation and consistently with it there may subsist a second one. .... But the customer of a bank is under a yet more specific duty. The banker contracts to act as his mandatory and is bound to honour his cheques without any delay to the extent of the balance standing to his credit. The customer contracts reciprocally that in drawing his cheques on the banker he will draw them in such a form as will enable the banker to fulfil his obligation, and therefore in a form that is clear and free from ambiguity."
Having regard to the peculiarity of that relation there must be, I consider, quite a number of implied superadded obligations beyond the one specifically mentioned in Foley v. Hill [F39] and Pott v. Clegg . [F42] Unless this were so, the banker, like any ordinary debtor, must seek out his creditor and repay him his loan immediately it becomes due - that is to say, directly after the customer has paid the money into his account - and the customer, like any ordinary creditor, can demand repayment of the loan by his debtor at any time and any place. It is only necessary in the present case to consider the one question whether there is, arising out of the relation of banker and customer, the implied obligation on the part of the customer to make an actual demand for the amount standing to his credit on current account as a condition precedent to a right to sue for that amount. I cannot find that the point has ever been discussed in any reported case. For the reasons I have already given, I consider that the point has never been decided, and that it is open to this Court to decide it.
Too much reliance must not be placed upon the language of learned judges who had not the precise point before them, but it is certainly worth noticing that in Foley v. Hill in the House of Lords, the Lord Chancellor says this [F43] : "He (the banker) is of course answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands." Lord Brougham says [F44] : "I am now speaking of the common position of a banker, which consists of the common case of receiving money from his customer on condition of paying it back when asked for, or when drawn upon." In Walker v. Bradford Old Bank [F45] A. L. Smith J., in speaking of the relation of banker and customer in connection with an assignment of moneys standing to a customer's credit at the bank, says: "I am of opinion that before and at the date of the assignment, and as long as the relation of customer and banker continued between the assignor and the bank, the ordinary relation of debtor and creditor existed between them (with the superadded obligation on the bank's part to honour the assignor's cheques, which is immaterial to the point under consideration), and that consequently there existed a contract on the bank's part to pay over on demand to the assignor all moneys then or thereafter standing to his credit." In Schroeder v. Central Bank of London [F46] Brett J., in dealing with the suggestion that a cheque on a banker was an assignment of the moneys standing to the customer's credit at the bank, says: "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."
These dicta all favour the contention of the present appellants, and they are supported by the very strong body of expert opinion which was given in evidence in the Court below as to the practice of bankers. Applying Lord Esher's test, as laid down in Hamlyn v. Wood [F47] , to the question whether the term contended for by the appellants must be implied in the contract between banker and customer, I have no hesitation in saying that it must. It seems to me impossible to imagine the relation between banker and customer, as it exists to-day, without the stipulation that, if the customer seeks to withdraw his loan, he must make application to the banker for it. It has been suggested that a decision to this effect would run counter to a line of authorities which have recognized and allowed garnishee proceedings in reference to amounts standing to a customer's credit on his current account, upon the ground that such amounts were debts capable of being attached. I do not agree with this suggestion. The effect of the service of a garnishee order nisi is, according to Lord Watson in Rogers v. Whiteley [F48] , to make the garnishee "custodier for the Court of the whole funds attached." The service of such an order is, in my opinion, a sufficient demand by operation of law, to satisfy any right a banker may have as between himself and his customer to a demand before payment of moneys standing to the credit of a current account can be enforced. As no demand for payment in the present case was made on or before August 1, 1914, it follows, in my opinion, that the plaintiffs had no accrued cause of action on that date, and the claim fails on that ground.
The appeal will be allowed with costs. The judgment must be set aside, and judgment entered for the defendants on the claim with costs. No order on the counterclaim, except that it be discontinued without costs.