N. Joachimson (A Firm Name) v. Swiss Bank Corporation.

[1921] 3 K.B. 110

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N. Joachimson (A Firm Name)
v Swiss Bank Corporation.

Court:

Judges: Bankes,
Warrington,
Atkin L.JJ.

Subject References:
Banker
Customer
Current Account
Debt
Necessity for Demand
Implied Term
Cause of Action

Hearing date: 1921 Feb. 9, 10, 11
Judgment date: 11 March 1921

Manchester District Registry

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Where money is standing to the credit of a customer on current account with a banker, in the absence of a special agreement a demand by the customer is a necessary ingredient in the cause of action against the banker for money lent.

Pott v. Clegg (1847) 16 M. & W. 321 and Foley v. Hill (1844) 1 Ph. 399; (1848) 2 H. L. C. 28 considered.

APPEAL from the judgment of Roche J. at the trial of the action without a jury.

On August 1, 1914, and for some time before that date the firm of N. Joachimson, the plaintiffs in this action, carried on business in Manchester. There were three partners in the firm, Siegfried Joachimson and Jacob Joachimson, who were both German subjects, and L. E. Marckx, a naturalized British subject residing in England. The firm had a banking account with the defendant bank in London. On August 1, 1914, S. Joachimson died, and the partnership became thereby dissolved. On that date a sum of 2321l. was standing to the credit of the partnership on current account. On the outbreak of war with Germany on August 4, 1914, Jacob Joachimson, who resided in Hamburg, became an alien enemy. No money was paid out of the banking account after August 1, 1914. On June 5, 1919, Marckx commenced this action in the firm name, for the purpose of winding up the affairs of the partnership ^[F1] , to recover the said sum of 2321l. as money lent by the plaintiffs to the defendants as bankers, or alternatively as money received by the defendants as bankers for the use of the plaintiffs. Upon the defendants' application on March 16, 1920, for particulars of the statement of claim the plaintiffs gave an undertaking that the only causes of action relied on arose on or before August 1, 1914: see Order XLVIIIA., r. 1. No demand was made by the plaintiff firm on or before that date for the repayment by the defendants of the sum claimed. The defence (so far as material to this report) was that, as no demand was made, no cause of action had accrued to the plaintiffs on August 1, 1914, and that therefore the action was not maintainable. ^[F2]

Roche J. held, upon the authority of Pott v. Clegg ^[F3] and Foley v. Hill ^[F4] , that the debt owing by a banker to his customer was in the same position in this respect as a debt owing by any other debtor, and could be sued for without any previous demand; that the evidence given by bankers to show a custom differentiating the case of bankers from that of other debtors failed to prove any such custom; and he gave judgment for the plaintiffs for the amount claimed. ^[F5]

The defendants appealed.

Schwabe K.C . and Conway for the defendants. There was no existing cause of action on August 1, 1914, when the partnership was dissolved, as no demand for the money was made. Money placed with a bank on current account is, no doubt, in the position of money lent by the customer to the bank: Pott v. Clegg ^[F3] ; Foley v. Hill ^[F4] ; but all the incidents of an ordinary transaction of loan do not exist. For instance, the bank is not obliged to seek out the customer and pay him the amount. The debt is only payable at the bank during banking hours. Further, a demand is necessary before the bank can be sued. If this were not so the customer could sue the bank the moment the money was paid into the bank. In the ordinary case of money lent no demand is necessary before bringing an action against the debtor: Norton v .

Ellam ^[F6] ; In re Brown's Estate . ^[F7] A demand is necessary in the case of a surety: Bradford Old Bank v. Sutcliffe . ^[F8] In In re Tidd ^[F9] North J. held that the Statute of Limitations did not begin to run against a person who had entrusted money to another for safety until demand, though it was contemplated that the bailee might use the money in business. In Pott v. Clegg ^[F10] the point that a demand was necessary to give a cause of action to recover money on current account at a bank was not pleaded, and therefore could not be raised; so the case is no authority upon the point. In Foley v. Hill ^[F11] Lord Lyndhurst L.C. decided the case on two grounds, first, that the Statute of Limitations applied, the relation of banker and customer not being a fiduciary relation; and secondly, that a simple account between banker and customer was not the proper subject for a bill in equity. There again the question of the necessity for a demand was not argued. In the House of Lords ^[F12] the decision was that the claim was not the proper subject-matter of a bill in equity, the relation of banker and customer being merely that of debtor and creditor.

The necessity for a demand was not discussed, but Lord Cottenham L.C. said ^[F13] that the banker had contracted to repay, "when demanded," a sum equivalent to that paid into his hands; and Lord Brougham spoke ^[F14] of the banker's duty being to repay the money "when asked." The contract which a banker enters into with his customer is that the banker will receive on account of the customer any moneys paid into his account, the banker having liberty to use the money in his business, and will on demand by the customer pay to the customer or to his order at the bank during business hours any amount not exceeding the credit balance; and sometimes there is the additional term that the banker will pay interest on the balance due; and further, that the banker will not terminate the relation without giving the customer reasonable notice.

The evidence given at the trial as to the custom of bankers supports this view of the contract.

[ATKIN L.J. referred to London Joint Stock Bank v. Macmillan . ^[F15] ]

There having been no demand on or before August 1, 1914, no cause of action existed on that date.

[ Marzetti v. Williams ^[F16] ; Agra Bank v. Hoffman ^[F17] ; Atkinson v. Bradford Building Society ^[F18] ; George Clare & Co. v. Dresdner Bank ^[F19] were also cited.]

R. A. Wright K.C . and Wilfrid Lewis for the plaintiffs. The relation of banker and customer is that of debtor and creditor with the superadded obligation to honour the customer's cheques to the amount of the moneys standing to his credit in his current account: Foley v. Hill . ^[F20] In London Joint Stock Bank v. Macmillan ^[F21] Lord Haldane said: "Ever since this House in 1848 decided Foley v. Hill ^[F22] 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." There are certain limitations upon the bank's obligation to pay cheques of the customer. The bank is only bound to cash cheques during banking hours and at the branch upon which the cheque is drawn. But a cause of action for money lent arises upon the money being deposited on current account, and the Statute of Limitations runs from that date without any demand: In re Tidd ^[F23] ; George Clare & Co. v. Dresdner Bank . ^[F19] Foley v. Hill ^[F20] is always cited in text-books for the proposition that in the case of money on current account at a bank the relation between the banker and customer is the ordinary relation of debtor and creditor: see Halsbury's Laws of England, tit Bankers and Banking, vol. i., p. 585, s. 1196. Lord Lyndhurst ^[F24] did so decide - namely, that the Statute of Limitations ran from the date of payment in, and the House of Lords ^[F22] , while not deciding that point, expressed no dissent from Lord Lyndhurst's view.

The word "demand" as used in some of the cases is, as pointed out by Scrutton L.J. in Bradford Old Bank v. Sutcliffe ^[F25] , meaningless, and he cites Norton v. Ellam ^[F26] , the case of a promissory note payable on demand, where express demand is not necessary. The precedent in Bullen and Leake's Precedents of Pleadings, 3rd ed., p. 41, of the common indebitatus count for money lent does not mention demand, and in the note it is stated that "money deposited by a customer with a banker may be thus recovered." A garnishee order may issue attaching money on current account at a bank as a debt owing to the customer, and this will be altered if the defendants' contention is correct. The decision of the learned judge was therefore right.

No reply was called for.

[BANKES L.J. We all think that a demand is necessary, but we will put our decision in writing.]

Cur. adv. vult .