Joachimson v Swiss Bank Corporation [1921] 3 KB 110 is a judicial decision of the Court of Appeal of England and Wales in relation to the fundamental nature of the legal relationship between banker and customer. Together with Foley v Hill (1848) 2 HLC 28 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.[1]
The point decided in the case was that a customer does not have a right of action against its bank for repayment of sums until the customer makes a demand (and accordingly, for the purposes of limitation periods, that time does not run until such a demand is made). However, the reason the decision is considered so important is for the influential comments made by way of obiter dictum by Atkin LJ in relation to the nature of the banker-customer relationship.[2]
The case is also cited as the leading authority for the proposition that a demand for repayment must be made at the branch of the bank where the account is kept; a position which appears increasingly anachronistic in modern banking.[3]
Facts
Siegfried Joachimson, Jacob Joachimson and L.E. Marckx jointly operated a business in Manchester as a partnership. L.E. Marckx was a naturalised British citizen, but the other two partners were German nationals. The firm opened and operated a bank account with the Swiss Bank Corporation.
No attempt was made to wind up the partnerships' affairs during World War I.
On 1 August 1914 Siegfried Joachimson died. Under English partnership law at the time,[4] this had the effect of dissolving the partnership. However three days later, on 4 August 1914, World War I broke out, and Jacob Joachimson returned to Germany. The firm's account with the bank was dormant for the duration of the war; the case report suggests that this might have been because of legal prohibitions relating to property of enemy aliens.[5] After the war, the English partner, L.E. Marckx, tried to wind up the affairs of the partnership, and sought repayment of the £2,312 held in the bank account from the bank. The bank refused to repay the sums in the account arguing that either (i) the firm had made no demand for repayment of the sums, and so they were not due; or in the alternative (ii) that if the right to repayment arose upon the death of Siegfried Joachimson, then it was now barred by the statute of limitation.[6]
The case report indicates that there was a great deal of procedural wrangling at first instance in relation to whether the claim could be brought by an individual partner or had to be brought in the name of the firm.
Decision
The Court of Appeal held unanimously that the claim was not statute barred. Until a customer demanded repayment from the bank, the debt was not due and payable, and thus limitation periods would not run. Bankes LJ held:[7]
It seems to me impossible to imagine the relation between banker and customer, as it exits today, without the stipulation that, if the customer seeks to withdraw his loan, he must make application to the banker for it...
(1921) 3 KB 110
The case is treated as important because of the fundamental principles which Atkin LJ set down in relation to the nature of the account. He said:[8]
The bank undertakes to receive money and to collect bills for its customer's 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 of 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 on 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 facilitate forgery.
The decision was handed down at a time when banks were transforming from a service available only to the very wealthy to a more mainstream part of daily commerce. Ellinger's Modern Banking Law[1] suggests that, taken together with Foley v Hill, the case established six fundamental propositions:
For a current or savings account (as opposed to a fixed term deposit account), sums are only repayable upon demand.
The demand for repayment must be made at the branch of the bank where the account is kept unless there is a contrary agreement between the bank and the customer.
Even without a demand, the sums held on account become repayable immediately if the bank is wound up.
The limitation period on the debt runs from the time when the customer makes demand and is refused.
The nature of the relationship between the banker and customer is fundamentally one of debtor and creditor, but banks also provide other services to their customers which cannot be described in debtor-customer terms, such as the obligation of the bank to honour cheques and payment instructions, and to collect sums paid into the account by way of cheque.
The legal position in relation to the banker-customer is largely expressed as being constituted by implied terms, and accordingly, can be modified by express agreement.
Some care needs to be taken with the last proposition: much of English law at the time was expressed in terms of "implied agreements" and "quasi contract"; a position which academics have pointed out should be deprecated and recognised that the courts were simply laying down legal rules and not implied agreements.[9]
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Bank B subsequently lends more money to the borrower and takes a second ranking mortgage over the same property.
Bank A then subsequently lends a second advance to the borrower, relying on its original mortgage.
Devaynes v Noble (1816) 35 ER 781, best known for the claim contained in Clayton's case, created a rule, or more precisely common law presumption, in relation to the distribution of money from a bank account. The rule is based upon the deceptively simple notion of first-in, first-out to determine the effect of payments from an account, and normally applies in English Law in the absence of evidence of any other intention. Payments are presumed to be appropriated to debts in the order in which the debts are incurred.
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Banque Belge pour L’Etranger v Hambrouck [1921] 1 KB 321 is an English trusts law case concerning the common law remedies for receipt of trust property.
Barclays Bank Ltd v W J Simms, Son and Cooke (Southern) Ltd [1980] 1 QB 677, [1979] 3 All ER 522 was a decision of the High Court of Justice relating to the recovery of a payment mistakenly made by a bank after the customer had countermanded the cheque.
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National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 is a decision of the House of Lords in relation to a banker's right to combine accounts under English law. It is the leading English case and a banker's right to combine accounts, and also an important decision relating to insolvency set-off.
Under English law, a bank has a general right to combine accounts where a customer has multiple accounts with the same bank. The right has been recognised since at least 1860. However it was not until 1975 in the House of Lords decision in National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 that it was finally determined that this was a type of set-off right rather than anything related to the banker's lien. Typically the right will be exercised where one account is overdrawn and the other is in credit so that the bank can secure full repayment of overdraft without the need to take any further action with respect to the customer. The broad rationale is that separate numbered accounts are set up for administrative convenience only, but the legal duty upon a bank to "account" to its customers for the sums held by it only extends to the net sum.
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.
Royal Trust Bank v National Westminster Bank plc [1996] BCC 613 was a decision of the Court of Appeal in relation to the nature of a floating charge.
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Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 is a judicial decision of High Court of Justice of England and Wales in relation to the banker-customer relationship, and in particular in connection with the bank's duties in relation to payment instructions which give rise, or ought to give rise, to a suspicion of fraud.
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