Chief Festus Makene Ikomi V Bank Of West Africa Ltd (1965)
LawGlobal-Hub Lead Judgment Report
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  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.”
The proper presumption in most instances is that the customer has been overdrawing and wishes to do so again (at p. 83, per Farwell LJ.); it is up to the intending guarantor to inquire if he wishes. That sort of guarantee differs from a guarantee given to an employer for the fidelity of a servant, and the rule on disclosure which obtains in the latter case cannot be invoked here.
Before dealing with the second argument, we have to observe that the plaintiff’s learned counsel, in our view properly and rightly, opened his address with this concession: that he could not advance the plea of non est factum; his argument is that unilateral mistake is a defence to specific performance, for which he cites Webster v. Cecil 54 Eng.R.812.ln that case the defendant, who had refused an offer of £2,000 made by the plaintiff’s agent, wrote to the plaintiff offering to sell at £1,100, and the plaintiff wrote to accept; whereupon the defendant looked at his note and discovered that in adding up the items of property he was selling, he mistakenly made the total £1,100 instead of £2,100, and he immediately told the plaintiff’s solicitors about his mistake. Sir John Romilly M.R. said that in that state of the case he would not grant a decree of specific performance, but leave it to the plaintiff to bring an action at law H so advised. The argument here is that the plaintiff thought he was to guarantee a loan of £2,500 and ought not to be held to the guarantee he signed for the current account.
In Webster v. Cecil the plaintiff was snapping at an offer which he must have well known to be made by mistake; indeed Brett LJ. in Tamplin v. James (1880) 15 Ch. D. 215 at 222, says in regard to Webster v. Cecil that “the purchaser was acting fraudulently in seeking to take advantage of what he knew to be a mistake.” Tamplin v. James shows that a mistake made by a party through his own fault entirely is not necessarily a valid defence to a suit for specific performance, and that in the cases where specific performance is refused on the sole ground of mistake by the defendant, the court, as h now administers both law and equity, ought to give the same damages as would, under the old practice, have been given in an action at law. We do not think that Webster v. Cecil is relevant to the case in hand in point of law, as this is not a suit for specific performance; and as to the facts here, far from snapping at a guarantee for the current account, Mr Knight had tried to put the plaintiff off, neither did he trick or make any misrepresentation to the plaintiff which he could advance as a reason for making the mistake he alleges on his part. The plaintiff may have thought, in consequence of what Mr Yon- da Kolo said to him, that when he signed the guarantee the bank would give Yon- da Kolo a loan of £2,500, but Mr Knight had no Inkling of that; for in his conversations with the plaintiff no mention was made of any loan whatever.
The plaintiff can read and write; he is in business as an auctioneer; he knows the difference between a loan account and a current account; he had guaranteed others before. He led Mr Knight to think that he was come to guarantee the current account; to help Mr Yon- da Kolo out of his difficulties. Mr Knight discussed the guarantee with him, and gave him a form of guarantee to sign which related to the current account, in which he could have read, right at the start, these words-
“I, Chief Festus Makene Ikomi of …., in consideration of your granting or continuing banking accommodation at my request to A.G. Yon- da Kolo and Sons…. hereby guarantee payment to you on demand of all sums which now are or at any time or times hereafter may become due” etc. And at the end of the 1st paragraph he would have found the proviso limiting the guarantee to the principal sum of six thousand pounds, with the amount wrttten in by hand. The signature of the guarantee is conclusive against the plaintiff, for he cannot advance the plea of non est factum, and his plea of his being induced to sign the guarantee by fraud or misrepresentation on the pan of the manager of the bank is not true on the facts of the case. Scrutton LJ. states the law in L’Estrange v. F. Graucob, Ltd.  2 K.B. 394; All E.R. [Reprint] 16, at p. 19 [etter] A, from which we quote, in these words:
“When a document containing contractual terms Is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.” Maugham LJ. agrees and adds at p. 20 [letter] F that the party cannot be heard to say that the document did not affect him because he did not know the contents. That case is cited by Lord Devlin in McCutcheon v. David Macbrayne Ltd. (1964) 1 W.LR. 125, at 134, as an unassailed decision that a signature to a contract is conclusive.
Equally it does not matter if the plaintiff had a loan to Yon- da Kolo at the back of his mind. Lord Reid quotes in McCutcheon etc., (above) at p.128, from Gloag on Contract, 2nd ad., p. 7, this passage:
“The judicial task is not to discover the actual Intentions of each party; it is to decide what each was reasonably entitled to conclude from the attitude of the other.”
Here Mr Knight was entitled to conclude that the plaintiff wished to guarantee Mr Yon-da Kolo’s current account with its existing overdraft and any further overdraft up to £6,000. the finding of the trial judge is that such was his agreement with Mr Knight.
The last plea in the Statement of Claim is failure of consideration; there it means that as the plaintiff was guaranteeing a loan but the loan was refused, the consideration for which he gave his guarantee failed. The plea is untrue on the facts. But the third argument on appeal is that as the bank suffered no injury before the guarantee was withdrawn, there was no reason why the bank should hold the plaintiff to his guarantee. The statement of account put In by consent showed a debit of three pounds for the 12th July; it was for a cheque Mr Yon- da Kolo had given his club, but Mr Knight had said in evidence that it would have been paid anyway, so it should not be regarded as having been paid in pursuance of the guarantee; and in any case, it was argued, the payment on that date was not properly proved. For the bank it was submitted that as the argument did not accord with the plaintiff’s pleading, which was binding on him, it should not be taken into account.
The proposition implied in the argument for the plaintiff may be summed thus: granted that a valid guarantee was given, if the bank has not given credit relying on the guarantee before it is withdrawn, the bank has no rights under the guarantee, on the ground that Mr Yon- da Kolo has not benefited. The plaintiff’s learned counsel referred to Lloyd’s v .Harper (1880-1) 16 Ch. 290. C.A., at 314 and 319. There the major point was whether the death of the father determined his guarantee for his son’s admission as an underwriter; it did not in that case. At p. 314 James L. J., said that-
“It perhaps might be hardly equitable for a banker or merchant to go on making advances after receiving a distinct notice from the guarantor that he would not be further liable.” At p. 319 Lush L. J. distinguishes between guarantee (a) in which the consideration is entire, e.g., one given for a lease, and (b) where the consideration is fragmentary, supplied from time to time, and therefore divisible, e.g., a guarantee given to secure the balance of a running account at a bankers or a balance of a running account for goods supplied; and the learned judge goes on to say that-
“it is reasonable to hold, unless the guarantee stipulates to the contrary, that the guarantor may at any time terminate the guarantee. He remains answerable for all the advances made or all the goods supplied upon his guarantee before the notice to determine it is given;”but one discovers at p. 320 that the learned judge says this too:
“As at present advised, I think it quite competent for a person to do that where, as I have said, the guarantee is for advances to be made or goods to be supplied, and where nothing is said in the guarantee about how long it is to endure.” He is speaking of a guarantee for future advances. Here the guarantee covers both past and future advances. What is more, there is paragraph 2 on what the guarantee shall extend to cover, in which portion (c) has a bearing on the cheque of £3, and there is paragraph 3 on when the notice of discontinuance takes effect which is three months after it is received. Lloyd’s v. Harper (supra) does not affect the present case, as the guarantee here has its own stipulations.
The truth of the matter is that learned counsel wished to argue that in effect the guarantee become a guarantee for an existing debt, and that there was no valuable consideration to sustain it as a contract which was not under seal; that is plain from his citing Wigan v. English and Scottish Law Life Assurance Association  I Ch. 291. The plaintiff’s pleading does not attack the guarantee for inadequacy of consideration. In the argument on appeal this new attack is made, not as a frontal attack, but by a sidewind of implication. It is not a course to be encouraged. However, as pointed out for the bank, the guarantee here states that-
“I.in consideration of your granting or continuing banking accommodation at my request to …. hereby guarantee payment…. of all sums which now are or may become due.Instead of pressing the customer for payment of his overdraft, the bank is to grant or continue banking accommodation; and to continue accommodation includes forebearance -which is the chief aim of a guarantee for an overdrawn current account – and further banking accommodation besides. The plaintiff’s teamed counsel has not suggested that the consideration stated is not adequate to sustain the guarantee; indeed in his reply he conceded that it would cover the existing overdraft of about £5,000; but he added that one must consider Webster v. Cecil (supra) – which we have considered.
In our opinion the third argument on appeal must also fail. As for the precise date when the £3 cheque was pail and the evidence of that date, that may be left for decision when the bank sues for payment as a matter which relates rather to the notice from the plaintiff withdrawing his guarantee and the time when it takes effect.
It is ordered that the plaintiffs appeal from the judgment of 31 st January, 1962 In the High Court, Ward Suit No. W/50/60, be and the same is hereby dismissed with forty guineas costs payable to the bank.
Other Citation: (1965) LCN/1249(SC)