British And French Bank Ltd V. R.A.B. Opaleye (1962)

LawGlobal-Hub Lead Judgment Report

BAIRAMIAN, F.J

The Bank has appealed against the decision of de Lestang, C.J., High Court of Lagos, who, on the 16th November, 1959, dismissed the Bank’s appeal from the judgment given on the 29th June, 1959, by J. A. Adefarasin Esq., then Acting Chief Magistrate.

Mr. Opaleye, the customer, had two accounts at the Bank, one in his own name, and another in the name of Fekemo Brothers, of which he was the sole account holder, and which will be referred to as the firm’s account. The firm’s account was overdrawn to the extent of £500, and when a cheque of £350 was paid into the private account, the Bank decided to utilise money from the private account in order to reduce the overdraft in the firm’s account, and told the customer that he could not draw on his private account. Then the customer told the Bank that the £350, less his commission, belonged to a stranger whose property he had sold; but this aspect of it does not seem to make any difference in the case. The point in the case is whether the Bank was entitled to combine the two accounts without notice and without the consent of the customer. The learned Acting Chief Magistrate thought not and the learned Chief Justice thought not, also. The Bank has argued that that was a mistake in law.

Mr. Impey has drawn attention to the case of Garnett v. M’Kewan, (1872) L.R. 8 Ex. 10, and to Greenhalgh (W.P.) & Sons v. Union Bank of Manchester, (1924) 2 K.B. 153. He has said that the former case means that the Bank can set off one account against another without notice, provided there is no agreement express or implied by the course of dealing, to the contrary; in regard to the latter case, he has said that it means the converse proposition, namely that the Bank cannot set off one account against another unless there is an agreement express or implied to that effect, without notice.

The statement of law given in Volume 2 of Halsbury’s Laws of England (Third Edition), at p. 172, in paragraph 322, is as follows:-

Combination of different accounts. Unless precluded by agreement, express or implied from the course of business, the banker is entitled to combine different accounts kept by the customer in his own right, even though at different branches of the same bank, and to treat the balance, if any, as the only amount really standing to his credit.

The note gives Garnett v. M’Kewan, and Greenhalgh (W.P.) & Sons v. Union Bank of Manchester, (with the words “banker precluded by agree-ment” in brackets), and another case, namely Buckingham & Co. v. London & Midland Bank Ltd., (1895), 12 T.L.R. 70, (with the words “where the banker was precluded by the course of business” in brackets).

The point about the customer having different accounts “in his own right” is probably this, namely, that he has both accounts in his name, and that neither account is a trust account.

Garnett v. M’Kewan was a case where the customer had accounts at two different branches, and one of them was in debit, and the bank, without giving him notice, utilized the credit in the other account, and refused to honour cheques drawn on the other account. The Court of Exchequer were all of opinion that the bank was entitled to do that, because there was no special contract and no usage proved to prevent the bank from doing that, or to require the bank to give him notice before doing it. The two accounts were both in the same name.

Greenhalgh, etc., is a more difficult case. It has the following in the headnote as the ratio decidendi:-

A banker who has agreed with a customer to open two ac-counts in his name, and who holds bills which the customer has specifically appropriated to one account, is not entitled, without the customer’s consent, to transfer the proceeds of such bills to the other account.”

Greenhalgh & Sons sold cotton to Winson & Co., who accepted bills drawn on them by the former. Winson & Co. sold the cotton to other firms, who gave Winson & Co. bills in payment. These Winson & Co. paid into their provisional bill account; according to the arrangement between them and the Bank, bills paid into that account would be kept there until maturity, when the proceeds of collection would be transferred to the general account, unless there were special instructions. Winson & Co. told the Bank later that they wanted the proceeds when collected to be used to pay Greenhalgh & Sons; the Bank transferred the proceeds when collected to the general account of Winson & Co., where they were swallowed by its debit balance.

We are not concerned here with the question of how it was that Greenhalgh &Sons could have sued the Bank -it was on the ground of equitable assignment and notice of it to the Bank – because here it is not Mr. Bola, the gentleman for whom the £350 or most it was said to be intended, but Mr Opaleye, the customer of the Bank, who sued the Bank. Here we are concerned with the question of moving money from one account to another. Swift, J. said in the Greenhalgh case, at p. 164:-

If a banker agrees with his customer to open two or more accounts, he has not, in my opinion, without the assent of the customer, any right to move either assets or liabilities from the one account to the other; the very basis of his agreement with his customer is that the two accounts shall be kept separate, and if the customer pays bills drawn upon him not into his general account, where they will be discounted and he will receive the benefit of being able to draw against them, but into an account in which they will only be used either to pay bills accepted by the bank or bills drawn by the customer which they are specifically to meet, I do not think a banker, any more than any other individual can change them from the one account into the other without the customer’s assent. On this point it seems to me that the only question to be decided is, what is the agreement between the banker and the customer? And, if that agreement is, as I find it to be in this case, that there shall be a general account into which bills are paid as cash and that there shall be an account into which bills shall be paid for some other purpose, bills or their proceeds cannot be moved from one account to the other at the whim of the banker without the consent, express or implied, of the customer.”

It turns out to be a question of the agreement between the customer and the bank. Apparently, as one may infer from the opening part of that passage, the agreement to keep the two accounts distinct and separate is inherent in the fact that the banker has agreed with his customer to open two or more accounts.

If the bank may merge them without notice, one can see that it may do him great harm. Suppose, for example, that the customer has private account and a business account; that the business account is in funds, but the other is in debit; the customer, not knowing what the bank has done or will do, gives out cheques on his business account to pay trade debts, say for goods bought; if the bank does not honour them on presentment, it will do him harm. That is illustrated in Buckingham & Co V London & Midland Bank, Ltd. (supra). There the customer had a loan account relating to a secured advance, and a current account; the bank thought that the security was inadequate and transferred the loan account to the current account, with the result that cheques given on the current account were not honoured by the bank. The bank called evidence of managers of banks for the custom entitling a bank to close an account without any obligation to give notice. The learned trial Judge, Matthew, J. left these questions to the jury:–

(1) Was it the course of dealing between the plaintiff and defendants that plaintiff was to be allowed to draw upon his open account without reference to his loan account?

(2) If yes, then was the plaintiff entitled to a reasonable notice that that course of business would be discontinued?

(3) Was such a reasonable notice given?”

The jury answered (1) and (2) in the affirmative and (3) in the negative, and awarded damages. The dominant point in the case is the importance attached to the course of business between the customer and the bank.

In effect, the course of business between them implies a contract by which the relation of banker and customer is regulated. In the case in hand, before the £350 was paid into the private account, that account had a credit of under £2, and the firms’ account had a debit o f £ 500. Such being the case, the Bank could not say that they kept an eye on the private account, but the customer could say that he was being allowed to overdraw on the firm’s account without reference to the state of his private account, and could in my view rightly, argue that the case fell within the exception in the statement of the law given in Halsbury, which was quoted earlier in this judgment.

I have dealt with this case as if it were quite like the English cases which I have cited from Halsbury’s, under the above statement of the law. I should, however, note that in those cases the accounts were in the same name, though one account was called the loan account and the other the current account, or, in the Greenhalgh case, the provisional bill account and the general account. In the case in hand one account is in the name of “Opaleye, Rafiu Afolabi Bello”, and the other account is in the name of “Fekemo Brothers”, and I think it can be said with justi

Other Citation: (1962) LCN/0956(SC)