THE LAW OF BANKING

Principle
1. Joachimson v Swiss Lord Atkin - A single contract governs
Bank [1921] 3 KB the general relations between the
110 bank and its customers
(Banker &
Customer
Relationship)
(Banker’s duties to The common law duties of a banker
customer) towards its customers

2. Foley v Hill (1848) The nature of the traditional banking

2HLC 28 contract is that of a Debtor–Creditor
(Banker & Relationship as regards deposits
Customer (where the bank is the debtor and the
Relationship) customer is the creditor), and the
Creditor – debtor Relationship as
regards a credit (where the Bank is
the creditor and the customer is the
debtor).

“Lord Cottenham in Foley v Hill:

“Money, when paid into a bank,
ceases altogether to be the money of
the principal. ....It is then the money
of the banker, who is bound to return
an equivalent by paying a similar sum
to that deposited with him when he is
asked for it….The money placed in the
custody of a banker is, to all intents
and purposes, the money of the
banker, to do with it as he pleases” -
slides
“Foley v Hill (1848) 2 HLC 28, 9 ER
1002 is a judicial decision of the House
of Lords in relation to the fundamental
nature of a bank account. Together
with Joachimson v Swiss Bank
Corporation [1921] 3 KB 110 it forms
part of the foundational cases
relating to English banking law and
the nature of a bank's relationship
with its customer in relation to the
account - E.P. Ellinger; E. Lomnicka; C.
Hare (2011). Ellinger's Modern Banking
Law (5th ed.). Oxford University Press.
pp. 121–122. ISBN 9780199232093.” –
Wikipedia -
https://en.wikipedia.org/wiki/Foley_v_Hill

The case decided that a banker does

not hold the sums in a bank account on
trust for its customer. Instead the
relationship between them is that of
debtor and creditor. When the customer
deposits money in the account it
becomes the bank's money, and the
bank's obligation to repay an
equivalent sum (and any agreed
interest) to the customer or the
customer's order.[2] – (Toby Baxendale (14
September 2010). "What is the Legal
Relationship Between the Banker and his
Customer?". The Cobden Centre.
 Retrieved 5 June2016.) – Wikipedia -
https://en.wikipedia.org/wiki/Foley_v_Hill

“The decision was crucial to the modern

evolution of banking. Had the
appellant's argument that the bank
should be treated as
a trustee succeeded then a bank would
not be entitled to use the sums
deposited with it for lending to other
parties because of the rule against
trustee's making a profit out of the trust
property.[3] - Keech v Sandford [1726]
EWHC Ch J76” Wkipedia
https://en.wikipedia.org/wiki/Foley_v_Hill

3. Great Western A series of transactions per se cannot

Railway Co v constitute a person into a customer;
rather, a customer is a person who has
London & County an account with a bank irrespective of
Bank, [1901] AC the duration of the relationship.
414

4. Woods v. Martins it was held that a bank which gave

Bank & Anor1959] investment advice to someone who did
not have an account with the bank had
1QB 55 the same duty of care as if he had an
account with that bank.

5. Ladbroke& Co v. The orthodox position is that a person

Todd (1914) 30 TLR becomes a customer of a bank as soon
as she opens an account with a bank
433).
6. Libyan Arab It is untenable for a person to raise a
Foreign Bank v defence of claim of right when he
Bankers Trust Co. steals from his bankers to say that the
[1989] QB 728 money he stole was in fact money he
(Implication of has deposited with the bank.
categorization ;
Banker & Customer
Relationship)

7. Ligget (Liverpool) This duty requires that the banker

Ltd v. Barclays must strictly comply with the
Bank [1928] 1 KB customer’s instructions to the banker
48 as contained in the mandate or as
(Abiding by the given from time to time. Where the
customer’s banker fails to abide by the
mandate) customer’s mandate the bank is held
to be in breach of contract and where
the customer’s account has been
wrongly debited, the customer is
entitled to have the debit reversed.
8. Sampson Xeponu Ditto
Tommey v
Standard
Chartered Bank Ltd

9. Ghana National Ditto

Association of
Teachers v
Standard
 Chartered Bank,
(2008-2018) CLRG

10. Nana Akwesi Osei v Duty of bank to Honour cheques

SCB properly drawn

Where a banker wrongfully

dishonours a cheque, he is liable to
the customer in damages for breach
of contract and in appropriate cases
defamation. The quantum of damages
would depend on the harm suffered
such as the repute and position of
customer

11. London Joint Stock It is the customer’s duty to write

Bank Ltd v. cheques in a such way that they
Macmillan & cannot be easily altered.
Arthur [1918] AC
777
(Duties of a
customer)

“"A customer of a bank owes a duty to the

bank in drawing a cheque to take
reasonable and ordinary precautions
against forgery, and if as the natural and
direct result of the neglect of those
precautions the amount of the cheque is
increased by forgery, the customer must
 bear the loss as between himself and the
banker."

12. Tournier v National At common law, subject to specific

Provincial and exceptions, a banker owed its
Union Bank of customers a duty of secrecy to keep
England [1924] 1 confidential all matters affecting the
KB 461 customer’s transaction with the bank.
(Duty of The obligation extends to information
confidentiality) obtained from other sources than the
customer’s actual account if the
occasion upon which the information
was obtained arose out of the
banking relations of the bank and its
customers.

1. Except compelled by law

2. Duty to the public to disclose
(e.g. to trace stolen money)
3. It is in the interest of the bank.
E.g. Bank sues client – this
way, information is made
public.
4. Disclosure made by express or
implied consent of client

13. Met Capital v GT a skilled professional person, such as

Bank a banker, agrees to render certain
services to his client for a fee, there is
implied at common law a term that
 he will render those services with the
exercise of reasonable skill and care

14. Greenwood v A customer of a bank also owes a

Martin’s Bank Ltd duty of care to the bank. However,
[1933] AC 51 this duty, unlike that of the banker, is
(Duties of the severely limited in scope. These
customer) duties are a duty of care to inform the
bank of forgeries, or fraud relating to
his account, of which he becomes
aware, immediately.

15. Tai Hing Cotton A bank is required to provide regular

Mill Ltd v Liu Chong statements to the customer as
Hing Bank Ltd agreed. Otherwise, the bank must
[1986] AC 80. provide accurate statement of
(Providing regular account within a reasonable time
and accurate bank and a statement of the balance on
records) request.
 The bank must keep and
provide accurate records.

(Estoppel) Unless expressly agreed, a customer

is not estopped from challenging the
accuracy of a bank statement. Failure
to scrutinize the bank statement does
not so bar him.
16. SAX Tsegah v Duty may extend to keeping other
Standard payment instruments such as ATM
Chartered Bank Card, debit and credit cards safe
(2001) unreported
(Duty to keep
payment safe from
falling into the
hands of
miscreants)

17. Barclays Bank "I do not think it can be dogmatically

(D.C.O.) v Dabo, asserted that an entry made in a pass
[1964] GLR 637 – book is in all cases conclusive and
MUST READ!!! binding on the bank, or conclusive or
(Status of bank binding on the customer, but each
statement- is it case must be judged on its own
conclusive?) particular facts, although the
customer in whose favour the entry
stands starts with the advantage that
prima facie it is an admission by the
bank in his favour, which cannot in
some cases be rebutted.” Sowah J

18. Amalgamated Bank Duose JA held that: “A bank

Ltd v Fraga Oil statement is not sacrosanct. It can be
Ghana Ltd [2012] subject of errors arising from
48 G.M.J 149 miscalculations, errors in filling or
 (Status of bank recording transactions, errors arising
statement- from descriptions of entries and
conclusive?) postings. Additionally to rebut the
presumption it must be proven that
certain entries in the bank statement
are false. The claimant, be it the
bank or the customer, must lead
concrete evidence to show that the
entries in the account were made
mistakenly or fraudulently. Duose JA:
“the integrity of a bank’s records are
guaranteed by the accuracy and
preservation thereof. Where a bank’s
records contain many errors a court
is bound to regard it with great
suspicion.”

19. Prosperity Limited In the absence of a special contract

v Lloyds Bank Ltd determining the duration of a banking
(1923), 39 TLR372 relationship, to give reasonable notice
to the customer before closing a
credit account. Reasonable notice is a
question of fact and depends on the
circumstances.

LENDING AND RISK MANAGEMENT

20. Shaw v. Picton “The general rule is that interest is
(1825) 107 E.R. not due by law for money lent, unless
1226 at p. 1230 from the general usage of trade or the
dealings between the parties, a
contract for interest is to be implied.”
21. Senedza v. It would seem that interest is not
Djokotoe [1991] 2 exigible on money lent in a social
GLR 81 context, as between friends, siblings
or close relations, unless there is
evidence to the contrary.
22. Devonald v Rosser Before a court will recognise an
& Sons [1906] instrument as negotiable through
mercantile usage the following
conditions must be satisfied:
1. the usage must be “reasonable,
certain and notorious”:
23. Easton v London 2. the usage must be general and not
Joint Stock Bank “a custom or habit which prevails only
(1886) in a particular
market or particular section of the
commercial world”:

24. London and 3. the instrument’s terms must not be

County Banking incompatible with negotiability (eg.
Co Ltd v London not marked “non negotiable)
and River Plate nor stated to be transferable by some
Bank Ltd (1887) method other than delivery:

25. Board of Inland A bill does not have to be drawn on

Revenue v any particular material, and there is
one famous
Haddock – example of a cheque being drawn on
Fictitious legal the side of a cow!
case).