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LA313 - Commercial Law - Cases
[IN THE COURT OF APPEAL]
N. JOACHIAMSON (A FIRM NAME)
SWISS BANK CORPORATION.
[1919. J. 707, 1289.]
[MANCHESTER DISTRICT REGISTRY.]
1921: Feb 9, 10, 11; March 11
Bank-Customer-Current Account--Debt--Necessity for Demand-Implied Term-Cause of Action.
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 naturalised 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 1 , to recover the said sum of 2321l. as money lent by the plaintiffs to the defendants as bankers, or alternatively as money received by this 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 against 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. 2 .
Roche J. held, upon the authority of Pott v. Clegg 3 and Foley v. Hill 4 , that the debt owing by a banker to his customer was in the same position in this respect m 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. 5
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 6 ; Foly v. Hill 7 ; 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 against the ordinary case of money lent no demand is necessary before bringing an action against the debtor: Norton v. Ellam 8 ; In re Browns Estate.9.A demand in necessary the case of a surety: Bradford Old Bank v. Sutcliffe 10 .In re Tide 11 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 6 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 7 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 against 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 12 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 13 that the banker had contracted to repay, against when demanded "a sum equivalent to that paid into his hands; and Lord Brougham spoke 14 of the bankers 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. 15 ]
There having been no demand on or before August 1, 1949 no cause of action existed on that date.
[Marzetti v. Williams 16 ; Agra Bank v. Hoffman 17 Atkinson v. Bradford Building Society 18 George Clare against Co. v. Dresdner Bank 19 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 super-added obligation to honour the customers cheques to the amount of the moneys standing to his credit in his current account: Foley v. Hill. 20 In London Joint Stock Bank v. Macmillan 21 Lord Haldane said: "ever since this House in 1848 decided Foley v. Hill 22 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 banks obligation to pay cheques of the customer. The bank is only bound to cash cheques during against banking against kin 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 Tide 23 ; George Clare & Co. v. Dresdner Bank. 24 ; Foley v. Hill 25 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 Halsburys Laws of England, tit Bankers and Banking, vol. 1, p. 585,s.1196. Lord Lyndhurst 26 did so decide-namely, that the Statute of Limitations ran from the date of payment in, and the House of Lords 27 , while not deciding that point, expressed no dissent from Lord Lyndhursts view. The word demand against as used in some of the cases is, as pointed out by Scrutton L.J. in Bradford Old Bank v. Sutcliffe 28 , meaningless, and he cites Norton v. Ellam 29 , the case of a promissory note payable on demand, where express demand is not necessary. The precedent in Bullen and Leakes 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 m writing.]
Cur. adv. vult.
March 11. BANKES L.J. read the following judgment. The material facts of this case are as follows against 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 naturalised Englishman, at all material times residing and carrying on business in England. The third partner on the outbreak of war became against 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 23001. On. June 5, 1919, the plaintiff commenced the present action in the name of 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 tile 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 customers 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 that the question will in practice arise. In most of the cases in which the question is likely to arise, even if a demand necessary to complete the cause of action, a writ is a sufficient demand. It is only therefore in the unlikely case of a banker cling the Statute of Limitations, or in a case like the present the facto 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, August 1, 1914. Roche J., while recognising that at first sight the conclusion as a matter of business seemed startling, gave judgement in favour of the plaintiffs, holding that the point had been decided in Foley v. Hill 30 and Pott v. Clegg. 31 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 Tide 32 , 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 31 and Foley v. Hill 30 in the House of Lords. North J. apparently accepted the proposition without any discussion of these cases. In Halsburys 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 33 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 34 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 31 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 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 aa 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 bankers hands is equivalent to money lent, went on to say that 35 , 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 recognising 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. 36 The main question in the action was whether an account between banker and customer, was the proper subject for a bill in equity. The Lord Chancellor, in giving judgement, 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 37 : "Here there was a loan by Foley to the defendants, to be repaid with interest at 3 percent; 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 38 the point mainly debated was again the question whether the plaintiffs 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 summarised 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 super added 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 customers current account. The recent decision of the House of Lords in London Joint Stock Bank v. MaCMillan 39, approving Young v. Grote 40 , 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. 41 Lord Haldane points out 42 that: "Ever since this House in 1848 decided Foley v. Hill 41 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 judgements, and notably by a later decision of this House, Scholfield v. Earl of Londesborough 43 , 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 in 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 super-added obligations beyond the one specifically mentioned in Foley v. Hill 41 and Pott v. Clegg. 44 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 accountand 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 45 : "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 46 : "I am not 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 47 A. L. Smith J., in speaking of the relation of banker and customer in connection with an assignment of moneys standing to a customers 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 super-added obligation on the banks part to honour the assignors cheques, which is immaterial to the point under consideration), and that consequently there existed a contract on the banks 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 48 Brett J., in dealing with the suggestion that a cheque on a banker was an assignment of the moneys standing to the customers credit at the bank, says, " This is not a case of the drawer going himself and demanding 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 Eshers test, as laid down in Hamlyn v. Wood 49 , 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 today, 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 recognised and allowed garnishee proceedings reference to amounts standing to a customers 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 50 , 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 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.
WARRINGTON L.J. read the following judgment [after stating the facts and the defences raised]: The question is: in the case of money to the credit of a current account with a banker, is the existence of an actual demand an ingredient in the cause of action ? In the text-books the question is answered in the negative, and it is said that the Statute of Limitations applies to a balance left untouched for six years before action: see for example Halsburys Laws of England, tit. Bankers and Banking, s. 1196, p. 586. This view appears also to have been accepted as correct by Lord Esher M.R. and Lindley L.J. in Atkinson v. Bradford Building Society51 , and by North J. in In re Tide 52 , but in neither of those cases did the point arise for decision.
The cases usually cited in support of the above statement are Foley v. Hill 53 , Pott v. Glegg 54 , and Foley v. Hill. 55 I have mentioned them in the above order, because it is the order in which the several judgements were given, Pott v. Clegg 54 having been decided between the judgment of Lord Lyndhurst L.C. in Foley v. Hill 53 and the decision of the House of Lords in the same case. 55 In Foley v. Hill 53 the plaintiff instituted a suit in equity for an account. The defendants were bankers who had received from the plaintiff many years before suit a sum of money for which they agreed to pay 3 per cent interest, but of this two payments only had been made, both more than six years before suit, and no interest had been credited for more than six years. The plaintiff insisted that the transaction was not one of debtor and creditor, but one of trustee and cestui que trust, and that the Statute of Limitations did not apply. The Lord Chancellor, having held that the case was one merely of a loan to the defendants to be repaid with 3 per cent interest, said 56 : "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." He then held that it was also a sufficient answer in equity, and that in that case there were no special circumstances to take the case out of the statute. There was another ground relied upon by the Lord Chancellor 57 as a sufficient answer to the suit-namely, want of equity-the account being so simple as not to be the proper subject for a bill in the Court of Chancery. The Lord Chancellor did not consider whether the accepted course of business as between bankers and their customers has not introduced into their relation a modification of that of an ordinary borrower and lender. Still there is undoubtedly an expression of opinion that the debt was barred by the statute, based on the assumption that the claim was an ordinary one for money lent, but the point did not really arise for decision, inasmuch as there was ample ground without it for dismissing the bill.
The next decision in point of time was Pott v. Clegg. 58 That case has been regarded as having decided that the contract between banker and customer is the ordinary one for money lent, and that the statute runs from the receipt of the money by the banker. But when it is examined it will be found that the customer, who desired to contend, and did contend, that the contract between banker and customer was a special one under which a demand was essential to the cause of action, had dot raised the point on lib pleadings: see per Rolfe, B., and the judgment of the Court delivered by Pollock C.B. proceeded on this footing. It is true that the majority of the Court were of opinion that money in the hands of a banker is merely money lent, but the Chief Baron expressed considerable 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 case again is not in reality a decision on the point.
In Foley v. Hill, before the House of Lords 59 , the decision turned upon the question, raised and solemnly argued, whether the relation of banker and customer was not that of trustee and cestui que trust rather than that of debtor and creditor. The learned Lords were all of opinion that it was the latter, and that the Lord Chancellor was right in dismissing the bill on the ground of want of equity. Again, therefore, the point as to the true nature of the contract and of the bankers obligation did not arise for decision. Lord Cottenham L.C. however did use expressions which seem to me, at all events, to leave open the question which we have to decide. He said 60 the banker "is of course answerable for the amount" namely, the money placed in his custody-"because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands." He in terms refused to deal with the question as to the application of the Statute of Limitations. Lord Brougham also expressly abstained from expressing any opinion upon the point, but he did, in the course of his speech, describe in terms almost identical with those used by the Lord Chancellor the nature of the bankers obligation. Lord Campbell confined his speech to the point as to want of equity, and Lord Lyndhurst added nothing material to his previous judgment in the Court of Chancery.
There is one other expression of opinion to which it is useful to refer. In Schroeder v. Central Bank of London 61 , the question arose whether a cheque was an assignment of a corresponding part of the drawers credit balance. After deciding this question in the negative for reasons not material to the present case, Brett J. said this 62 : "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, and consequently there can be no debt owing by the defendants to the plaintiffs." This is so far as it goes, the expression of an opinion in favour of the view contended for by the defendants.
In this state of the authorities it seems to me that the question we have to decide has been left open, so far as actual decision is concerned, with expressions of opinion both ways and we must deal with it accordingly. It is, of course, well settled that in the ordinary case of money lent "the debt which constitutes the cause of action arises instantly on the loan": per Parke B. in Norton v. Ellam 63 ; and just before the same learned judge said: "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;" and the real question is whether or not in the special case of banker and customer the obligation to give notice is part of the contract between them.
There are some points in reference to the relation of banker and customer which seem to me to indicate that such obligation is part of the contract. If the general rule above mentioned were applicable, the banker would be bound to seek out his customer and pay him, and the customer would be bound at any time and without notice to receive the amount due, but it is well settled that a banker is not at liberty to close an account in credit by payment of the credit balance without giving reasonable notice, and making provision for outstanding cheques. This restriction on a bankers liberty to discharge his debt, seems to me inconsistent with an obligation on his part to pay without demand. Of course, if the customer requires payment, he waives his right to receive notice, and then the bankers liability would immediately arise. There was evidence in the present case that bankers never in fact pay without demand, and though this by itself may not be evidence of a custom binding on both parties, it at all events shows that bankers and customers habitually act on the assumption that notice shall be given on the one side as well as on the other.
Again, there are mutual obligations on both banker and customer in reference to the payment and drawing of cheques: London Joint Stock Bank v. Macmillan 64 .Cheques drawn on one branch of a bank are not payable at another. Bankers are not required to pay cheques except at the banking house and in banking hours.
All these matters seem to me to distinguish the contract between banker and customer from the ordinary case of a loan of money, and having regard to the state of the authorities I think we are at liberty to hold, and ought to hold, that a. demand, either by the issue of a writ or otherwise, is an essential ingredient in the cause of action, and that without such demand no cause of action accrues. In the present case there was no demand on or before August 1, 1914. It may be suggested that the view we take is inconsistent with the operation of a garnishee order upon a banking account. I do not think so. In my opinion, the service of the order nisi would be a sufficient demand.
In my opinion, therefore, no cause of action had accrued on August 1, 1914, and the action was not maintainable. For these reasons I am of opinion that the appeal succeeds, and judgment should be entered for the defendants with costs here and below. The counterclaim will be dealt with as Bankes L.J. has said.
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 super-added, an obligation of the bank to honour the customers 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 customers 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 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 banker and customer, but if it were necessary to fall upon the course of business and the custom of bankers, 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 ex 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. Mascll 65 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 66 , 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 67: "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 66 , 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. 68 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 401. 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, I 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 to me that the parties must have intended that the handed to the banker is only payable after a demand of the contract negatives the duty of the debtor to his creditor and pay him his debt. If such a duty existed and were performed, the creditor might be ruined by on of outstanding cheques being dishonoured. Moreover payment can only be due, as it appears to me, at the branch appears money handed nature find out 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 69 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 defendants testator to the plaintiffs 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 super-added 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. 70 This 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 71 and affirmed there by all the Lords present, including Lord Lyndhurst himself, upon one only of the grounds relied upon the judgement below, the point as to the Statute of Limitations 1921 being expressly reserved, I do not think that we are bound to treat the whole of Lord Lyndhursts judgement as binding upon us. It may be noted that the decision of the Court of Exchequer in Pott v. Clegg 69 had been given between the dates of the decision of Lord Lyndhurst in Foley v. Hill 70 and the hearing in the House of Lords. 71 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 debtors 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 judgment debtor is entitled though they are not presently payable: see the decision of the Court of Appeal in Driscoll v. Manchester Insurance Committee. 72 The service order nisi binds the debt in the hands of the garnish is., creates a charge in favour of the judgment creditor bank disputes that the amount is payable, there is power to provide for a demand being made before an or payment is made. Possibly the order nisi in itself operates 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 customers 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 allowed, and that judgment should be entered for the defendants on the claim with costs.
Solicitors for plaintiffs: Rawle, Johnstone Co., for Addleshaw, Sons Latham, Manchester.
Solicitors for defendants: Michael Abrahams, Sons Co.
W. F. B.
[Reported by G. M. SMAILES Esq., Barrister-at-Law]
(1). See, Rodriguez v. Speyer  A. C. 59.
(2). There was a counterclaim for a sum exceeding that claimed, but it is unnecessary to refer to it further.
(3). 16 M. & W. 321.
(4). 2 H. L. C. 28.
(5). Other points were raised both before Roche J. and the court of Appeal, to which it is unnecessary to refer.
(6). 16 M. & W. 321.
(7). 2 H. L. C. 28.
(8). (1837) 2 M. & W. 461.
(9).  2 Ch. 300.
(10.)  2 K. B. 833.
(11).  3 Ch. 154.
(12). 2 H. L C. 28.
(13). Ibid 36, 37.
(14). Ibid. 43.
(15).  A. C. 777, 814.
(16). (1830) 1 B. & Ad. 415.
(17). (1864) 34 L J. (Ch) 285.
(18). (1890) 25 Q. B. D. 377, 381.
(19).  2 M B. 576.
(20). 1 Ph. 399; 2 H. L C. 28.
(21).  A. C. 814.
(22). H. L C 28.
(23).  3 Ch. 154.
(24).  2 K.B 576.
(25). 1 Ph. 399; 2 H.L.C 28.
(26). 1 Ph. 399.
(27). 2 H. L C. 28.
(28).  2 K.B 848.
(29). 2 M. & W. 461.
(30). 2 H.L.C 28.
(31). 16 M & W. 321.
(32).  3 Ch. 155.
(33). (1844) 13 M. & W. 452, 458.
(34). 2 M. & W. 464.
(35). 16 M. & W. 328.
(36). 1 Ph. 399.
(37). 1 Ph. 404.
(38). 2 H. L. C. 28.
(39).  A.C 777.
(40). (1827) 4 Bing. 253.
(41). 2 H. L C. 28.
(42).  A.C 814.
(43).  A.C 514.
(44). 16 M & W. 321.
(45). 2 H. L C 36.
(46). Ibid. 43.
(47). (1884) 12 Q. B. D. 611, 516.
(48). (1876) 34 L T. 7359 736.
(49).  2 Q B. 488, 491.
(50).  A.C 118, 122.
(51). 25 Q. B. D. 377.
(52).  3 Ch., 154.
(53). 1 Ph. 399.
(54). 16 M. & W. 321, 324, 328.
(55). 2 H. L C. 28.
(56). 1 Ph. 404, 405.
(57). 1 Ph. 407.
(58). 16 M & W. 321, 324, 328.
(59). 2 H. L C. 28.
(60). 2 H. L C 36.
(61). 34 L T. 735.
(62). Ibid. 736.
(63). 2 M & W. 464.
(64).  A. C. 777.
(65). 13 M. & W. 458.
(66). 2 M. & W. 461.
(67). Ibid. 464.
(68). (1666) 1 Wms. Saund, ed. 1871, p. 33.
(69). 16 M. & W. 321.
(70). 1 Ph. 399.
(71). 2 H. L C. 28.
(72).  3 K. B. 499.