M.S Awolesi V. National Bank Of Nigeria Limited (1962)

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TAYLOR, F.J

TAYLOR, F.J

The facts of this case have been sufficiently and clearly set out in the judgments which will be delivered by my Lords Unsworth, and Bairamian, F.J.J. The authorities to which our attention was drawn at the hearing of the appeal have also been fully dealt with in those judgments and suffice it here for me to direct my attention to what I consider the major issue in this appeal, which I may state shortly as follows:-‘Is the opening of account No.2 by the respondent bank in favour of the principal debtor, a substantial breach of the agreement of guarantee, exhibit ‘C’, entered into between the appellant and the respondent bank?

This agreement was entered into on the 30th December, 1955 and at that time the indebtedness of the principal debtor to the respondent bank was £6,766-16s-9d as deposed to by the Manager of the respondent bank. Clause 1 of the agreement provides inter alia as follows:-

‘In consideration of the Bank (which expression shall include their successors and assigns) continuing the existing account with Emanuel Olasemi Adeyemi Taiwo of 140, Akarigbo Street, Shagamu (hereinafter called the Principal), for so long hereafter as the Bank may think fit……

Now on the 31st December, 1955, again on the evidence of the manager of the respondent Bank, this Shagamu account of the principal debtor stood at £10,096; and in the month of January 1956 a second account was opened by the principal debtor. On the evidence of this witness quite substantial sums were paid into this account and there was little effort made to reduce the indebtedness on the old account. This is what the witness says:-

‘Approximately £29,000 was paid into this account in year 1956. from 1st January, 1957 to 31st March, 1957 approximately £4,00 was paid in.’

‘Defendant opened No.2 account on 12th January, 1956 with deposit of £354. On 21st August, 1957 No.2 account was £2-17s-5d in credit. Up to 31st December, 1956 he paid £14,000 odd into No.2 account.

It should be borne in mind that the opening and operation of this account was done without the knowledge of the appellant who was kept completely in the dark as to what was going on between the respondent bank and the principal debtor. The word ‘continuing the existing account’ in Clause 1 seem to me incapable of any other construction than that the parties had agreed that the account of the principal debtor existing on the 30th December, 1955 shall be continued as such, i.e. in an unbroken state, and that to my mind negatives the opening of a second account in the circumstances disclosed above.

Clause 1 however, goes on to provide that:-

‘…………. or otherwise giving credit or accommodation or granting time to the Principal, I the undersigned, Moses Sowemimo Awolesi, Afin Akarigbo, Shagamu, hereby guarantee, ‘

The respondent bank cannot in my view find shelter under this provision for the opening of the second account is not a giving of credit or accommodation or granting of time in respect of the existing account.

When one goes further and looks at the other clauses in the agreement, one finds that the words ‘ultimate balance’ in clause 3, and ‘account’ in clause 6 can only be read in the light of clause 1 as relating to ‘the existing account’. If the parties intended that the principal debtor should be placed in a position where he could open more than one account, and the guarantee should cover such accounts, then in my judgment they should say so in clear and unambiguous words, for it has been said that the law favours a surety and protects him with considerable vigilance and jealousy. In the case of Ward v. National Bank of New Zealand. (1882-3), 8 A.C. 755 at 764, Lord Justice Cottons observations in Holme v. Brunskill, 3 Q.B.D. 495 are contained in the judgment of their Lordships delivered by Sir Robert P. Collier, which reads thus:-

‘The true rule, in my opinion, is that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that, if he has not consented to the alteration, although in cases where it is without inquiry evident that the alteration is unsubstantial, and one which cannot be prejudicial to the surety, the surety may not be discharged; yet that, if it is not self evident that the alteration is unsubstantial, or one that cannot be prejudicial to the surety, the Court will not in an action against the  surety, go into the effect of the alteration.’