What constitutes a banker’s customer

A person whose money has been accepted by a banker on the footing that the banker undertakes to honour cheques up to the amount standing to that person’s credit is a customer of the banker, and the position is unaffected by the banker’s belief that the account is held in trust, nor does that make the supposed cestui que trust a customer

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 15, lines 11-15; Page 16, lines 17-22; page 16, line 40—page 17, line 4) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.

Ack: Alan Milner. All Rights Reserved (LawHub NG).