Chief Festus Makene Ikomi V Bank Of West Africa Ltd (1965)

LawGlobal-Hub Lead Judgment Report

BAIRAMIAN, J.S.C.

The plaintiff sued the bank for a declaration that the guarantee he signed on 11th July, 1960 was void, and for ancillary relief; he failed in the High Court and has appealed. Briefly put, the allegations in the plaintiff s pleading are as follows. In June, 1960 Mr A.G. Yon-da-Kolo asked the bank for a loan of £2,500, and was told he could have it if he provided a guarantor; the plaintiff went to the bank and offered to guarantee the promised loan of £2,500, and his offer was accepted subject to his depositing title deeds for security; he took his deeds and signed a document without reading it, and was told by the manager to ask Mr Kolo to come for the money, but when Mr Yon-da Kolo went for the money, he was refused; and upon being told by him on the 13th of the refusal, the plaintiff wrote for the return of his deeds he repeated his request but it has been refused, ft was later that he learnt from the manager of the bank that his deeds were being retained for Mr Yon-da Kolo’s existing debt, but he had never agreed to guarantee that: at the trial he would plead fraud on the ground that he was not told of Mr Yon-da Kolo’s existing debt, and on the ground that he delivered his deeds only on the promise of a loan of £2,500 to Mr Yon-da Kolo; alternatively, that he signed the documents out of misplaced confidence in the manager, with whom there never was any agreement to guarantee Mr Yon-da Kolo’s debt, and that he explained to the bank as soon as he discovered the fraud or mistake or he claimed a declaration that the gaurantee and charge was void and should be set aside for fraud or mistake failure of consideration, and an order for the return of his deeds.

Briefly, the bank’s defence is that Mr Yon-da Kolo asked but was refused a loan of £2,500; in June the manager discussed with him the reduction of his account and future accommodation, and suggested his providing a guarantor; at the first interview with the plaintiff, Mr Yon-da Kolo’s indebtedness and his being guaranteed was discussed in general terms, but no loan was mentioned, and the manager did not agree to grant any loan upon deposit of deeds and a guarantee; on July 11th the plaintiff signed two documents (viz., the guarantee and a memorandum for the deposit of his deeds) which were explained to him and which he read before signing; he was not told to ask Mr yon- da Kolo to collect any money: It was true that the plaintiff wrote on July 13th and later, asking for the return of his documents; but he always knew that he was guaranteeing Mr Kolo’s current account with a limit of a principal sum of £6,000 and depositing his deeds for that purpose; it was not something he learnt later; he knew of Mr Yon- da Kolo’s existing debt, and no loan to that customer was ever discussed.

The plaintiff gave evidence to the following effect. Mr Yon-da Kolo told him that the manager of the bank, Mr Knight, asked him to approach the plaintiff to guarantee him for a loan of £2,500; he spoke with Mr Knight, who said he would lend that sum if the plaintiff guaranteed the loan and deposited deeds as security; he took his deeds, and Mr Knight asked him to sign a printed paper, which he signed without reading it because Mr Knight, with whom he was familiar, was in a hurry to go to breakfast; there was nothing in manuscript on the document; he asked Mr Yon-da Kolo to go and take the money, but Mr Yon-da Kolo came to say it was refused; he saw Mr Knight, who would not explain why, so he wrote on the 13th July for the return of his documents. what he says in his letter (exhibit C) is this:

“Further to our conversation yesterday morning in connection with my intention to guarantee Mr A.G. Yon da Kolo for a loan from your bank, I deeply regret that I have to change my mind and withdraw my intention.” And he asks for his documents. He withdrew his guarantee, not because Mr Yon-da Kolo told him that the manager refused to give him the money, but because he changed his mind; and ft looks as If he did so without telling Mr Yon- da Kolo. He had guaranteed someone at Barclays Bank; that person deceived him, and he withdrew after he had signed. His evidence goes on as follows- “It is the same thing I found in this case. Yori- da Kolo told me nothing about his indebtedness to the bank. I wrote exh. C because I changed my mind.

I did not mention the sum of £2,500 in the letter because there was no need to do so. I had two interviews with Mr Knight before I signed exhibit B. Mr Knight discussed with me the question of the guarantee. He asked me to go home to think about ft. I thought of it.”

And later he admits that he relied on what Mr Yon- da Kolo told him and that was why he went to the bank to sign the guarantee (exhibit B). The plaintiff’s admissions virtually concede the defence of the bank and vindicate Mr Knight, its manager: far from snatching a guarantee, he tried to put the plaintiff off. The fact is that Mr Yon-da Kolo deceived him, the plaintiff; and after what the plaintiff said about him, he might as well not have been called.

Mr Yon-da Kolo’s evidence is that he was refused a loan of £2,500 and told to reduce his overdraft, but he says that on June 20th Mr Knight said he would consider his request for that loan If he produced a guarantor and suggested the plain tiff. He spoke to the plaintiff, who looked at his books and stocks and was satisfied. Later the plaintiff told him that he had signed the documents and was told by Mr Knight that Mr Yon-da Kolo could take the money; he telephoned Mr Knight, who said he should see him on Monday the 11th; but when he called Mr Knight said no, not before he heard from Lagos as he had sent the papers for the solicitor to see whether the deeds were good; and that made him suspicious, so he told the plaintiff that he was refused the loan.

Mr Yon-da Kolo admits that there was no agreement for a loan of £2,500 but, he says, only an understanding. As to the interview with the plaintiff, he says this: “I made a full and frank disclosure of everything to him. I did not show him my bank account. He did not ask for it…. 1 know (read “knew) that some of my cheques were not honoured and were referred back to me.I only told Chief Ikomi about the value of my trade.”

At the time his overdraft was about £5,000; the disclosure was neither frank nor full. He may also have misled the plaintiff Into thinking that if he found a guarantor, he would get a loan. what he told the plaintiff is not evidence of what Mr Knight had told him. Mr Knight had been manager at Ward until July, 1959 and knew the plaintiff and Mr Yon-da Kolo well. He was at Ward between May 4th, 1960 and July 15th. Mr Yon-da Kolo had been trading with a fluctuating overdraft running up to nearly £3,900, and the manager in April, 1960 wrote to him that he should reduce it. Mr Knight acceded to his request for more facility and let him run up to £5,000 or so, and then stopped honouring his cheques about mid-June or shortly after.

In the meantime he refused a loan and told Mr Yon-da Kolo that he should reduce his overdraft by about a half and provide security, and then the bank would consider his application for a loan. The first gentleman to offer a guarantee was Mr Otuedon, but when Mr Knight explained to him what it meant he backed out. Then the plaintiff came saying he wished to help Mr Yon-da Koio out of his present difficulties by guaranteeing him, and Mr Knight explained to him what that meant; he said he was aware, and Mr Knight asked him to think about it. He came again to pursue the matter, and Mr Knight told him the guarantee would have to be supported by a charge on property. On a subsequent day the plaintiff came with his title deeds and was asked to come later in the morning; in the meantime the forms were prepared; the plaintiff was asked to look at them and see what was in them, which he did and then signed. The plaintiff was never told he was guaranteeing a loan of £2,500. About twenty-four hours later he asked for the return of his documents: they had been sent to Lagos for verification. Mr Knight thinks ft was at the second interview that he told the plaintiff about Mr Yon-da Kolo’s account being in debit about £5,000. His headquarters were not happy, but ft was wrong to think that he was desperate on getting security; apart from legal action, if he were to deceive the plaintiff that he was guaranteeing a loan and spring a guarantee for the current account on him, he would be dismissed. He never discussed with him Mr Yon-da Kolo’s request for a loan; what the plaintiff told him was that he wanted to help Mr Yon-da Kolo in his present difficulties. Later Mr Yon-da Kolo telephoned to ask for extra money, and Mr Knight told him he could have up to £6,000. That was the figure the plaintiff, when asked, said was as far as he wanted to go. For Mr Yonda Kolo it really meant a margin of about £500. If the plaintiff had not guaranteed the overdraft, the bank was going to pursue Mr Yon-da Kolo and sue him ff he did not pay.

Kester J., the trial judge, remarks that the fraud alleged is that Mr Knight accepted the plaintiff’s guarantee for a loan of £2,500 to be made to Yon-da kolo, but made him sign a blank form in which later he wrote in £6,000 as the amount guaranteed. The learned judge reviews the evidence and states that in his belief the £6,000 was already written in before the plaintiff signed the guarantee. He accepts Mr Knight’s evidence; it was not he but Mr Yon-da Kolo who misled the plaintiff. That grave allegation of fraud was mentioned but not pursued in the plaintiff’s appeal.

In the appeal before us, the first argument is that the manager of the bank had a duty to tell the plaintiff that Mr Yon-da Kolo owed about £5,000, but did not, and the concealment of it discharged the plaintiff. The trial Judge was of opinion that Mr Knight did tell him at the second interview. As it is his case that he did not ask, the law is on the side of the bank: See London General Omnibus Co. Ltd. v. Holloway [1912] 2 K.B.72, cited as one of the cases in Halsbury’s laws of England, 3rd ed., vol. II, P. 237, where the law is stated thus-

“A banker is not bound to volunteer to an intending guarantor information as to the state of the account or whether the customer was or was not in the habit of overdrawing. If asked by the intending guarantor, however, he must give the information, this being sufficient reason for disclosing the customer’s account.”