Samuel David Paipoe V. Bank of British West Africa (1933)
LawGlobal Hub Judgment Report – West African Court of Appeal
Action for account—Claim for refund of money alleged to have been paid by mistake—Compound interest charged on overdraft at the rate of 10 per cent with monthly rests—Custom of Bankers—Notoriety of custom—Acquiscence.
In an action brought by a customer against his Bankers for an account to b.; taken of the moneys alleged to have been overpaid by him in respect of interest charged on his overdrawn current account it was held as follows, affirming the judgment of the Court below :—
- That there had been no over payments by the plaintiff to the defendants.
- That the money paid by the plaintiff to the defendants to settle his over-drawn current account was not paid by mistake.
- That the charge of 10 per cent compound interest with monthly rests on an over-drawn current account was fair and reasonable, and in accordance with the well recognised custom of Bankers in England and the Gold Coast.
- That such custom had been proved to be well known to the plaintiff who acquiesced in the rate of interest charged against him.
R. E. Phipps for the Plaintiff-Appellant.
C. C. Carter for the Defendants-kespondents. The following judgments were delivered :-
MICHELIN, ACTING C. J. THE GOLD COAST COLONY.
This is an appeal by the plaintiff from the judgment of the Chief Justice (Sir George Campbell Deane) dated the 30th of December, 1932, in which he gave judgment for the defendants with costs.
By his writ of summons dated the 8th of July, 1932, as amended in Court on the 21st of September, 1932, the plaintiff claimed that an account should be taken of what sums had been overpaid by the plaintiff to the defendants as interest on his overdrawn account with them or otherwise from the 1st of January, 1918, to the 11th of February, 1932, the date of the settlement of the said overdrawn account, and for payment to the plaintiff of the amount so found due with interest thereon from the date of such payment to the date of filing of the writ of summons herein.
Pleadings were ordered by the Court and filed by Counsel on
each side, and after an exhaustive hearing the Chief Justice delivered
a written judgment on the 30th December, 1932, in which after
setting out the facts and the law, he concluded as follows :—
” I am of opinion that the money paid by plaintiff on the 11th of February, 1932, to settle his account with the Bank was not paid under any mistake, but that on the contrary right through he knew of what was being done and agreed to it. I am further of opinion that the charges against plaintiff
right through were the customary and usual charges of Banks in the Gold Coast and fully justified, and I see no reason for reopening the account which has been settled.”
” There must be judgment for the defendants with costs.”
Three grounds of appeal were originally filed, but in arguing the appeal Mr. Phipps, on behalf of the appellant, confined his submissions to the following two grounds, abandoning the second ground :-
(1) Some material findings of fact were against the weight of evidence.
(3) The judgment was wrong in law.
He dealt with these two grounds together, and his submissions for the purpose of convenience may be grouped under the following five headings :-
- Question of verbal agreement with Bank for overdraft in January, 1918.
- Was the Bank justified in charging 10 per cent compound interest with monthly rests ?
- Was there acquiescence on the part of the plaintiff in regard to such charges ?
- Was the account closed on the 17th August, 1921 ?
- Was the account closed on the 18th November, 1922 ?
In arguing as to (1), Mr. Phipps submitted that at the beginning, when the plaintiff started to negotiate with the Bank for an overdraft, it was verbally agreed between the parties that for allowances covered by any fixed deposit, the plaintiff should pay to the Bank interest at the rate of 6 per cent per annum on any overdraft up to the limit of any fixed deposit they might hold for the plaintiff, and interest at the rate of 8 per cent per annum on sums in excess of such limit. Instead of complying with that agreement, however, the Bank charged him interest at the rate of 8 per cent when the overdraft was below the amount of the plaintiff’s fixed deposit, and they also charged him fluctuating rates of interest according to the instructions received from time to time from the head office, and capitalised this interest with monthly rests, which was a breach of the verbal agreement entered into between the parties. In proof of his contention as to this agreement, learned Counsel referred the Court to the evidence of the plaintiff at page 19 of the record in which he stated as follows :-
” The deposit was a fixed amount.
” For any overdraft up to £2,500 I agreed to pay 6 per cent per annum and it was agreed that for any sum overdrawn beyond £2,500, 8 per cent whether it was secured or unsecured.” He also referred to page 138 of the Bank’s ledger which was
admitted in evidence as exhibit ” AA ” where the following entry in
red ink appears at the top of the page :—
” Covering any overdraft in current account fixed deposit 25 /168 £2,000, interest 6 per cent.
The knowing note in pencil being made under this entry : S. D.
PaPPx,
” 8 per cent excess.”v.
In dealing with-=matter, the learned Chief Justice in the B.S.W.A.
course of his judgment stated as follows :—Michelin,
” it is at mice apparent therefore that the course of Ag: business hehveen the parties as shewn by the Bank’s ledger is quite inconsistent with the agreement which plaintiff alleges was made with the defendants.
” Yet we can hardly believe that had such an agreement been made preliminary to the granting of the overdraft, as the plaintiff alleges, it would no_t at once have been reflected in the defendants’ books unless they consciously and deliberately from the first intended to defraud him. Instead of being so reflected what do we find Intiirest for the first 11 months at 8 per cent then at rates varying between 9 and 10 per cent for a year and only after that for the first time at 6 per cent on the sum secured by deposit, 9 per cent on the excess. These figures are to =my mind significant.
••••
On the very question of the amount of interest therefore I find, if we except the plaintiff’s statement made 13 years after the event, there is nothing to support the plaintiff’s claim that he made a special agreement with the Bank as a preliminary to obtaining an overdraft at the rate he says he did, and that the probabilities of the case are decidedly against him.”
Although the learned Chief Justice did not deal specifically with the entry in red ink and the pencil note at the top of page 138 of the ledger, it is clear that this entry cannot be regarded as forming evidence of any verbal agreement entered into between the parties.
It does not form one of the entries in the ledger made in the ordinary course of the business of the Bank. Although it is alleged by the plaintiff that this agreement was made in January, 1918, the entry in red ink appears for the first time in the ledger in the month of April, 1918.
The fact that it represented an agreement made between the parties is completely refuted’ by the entries in the defendants’ books showing that different rates of interest were consistently being debited by the defendants to the plaintiff’s account.
It is significant also that in a letter dated the 7th September, 1927, from the plaintiff to the defendants’ Manager in Accra (exhibit ” R “), he stated inter aka as follow: :—
” In reference to my account you will observe that from the business I have done with you from 1918 to 1923, sometimes my overdraft has stood up to a debit balance of between £25,000 to £50,000, bearing as you are aware a considerable money having interest running per month, apart from the interest riming when the account was brought down to the
agreed limit of £8,000 and from which it has been reduced to where it is to-day,” no mention whatever was made as to the verbal agreement for a charge of 6 per cent interest.
Again when the plaintiff wrote the General Manager of the Bank in London on the 14th November, 1931, in which he went at some length into his accounts and dealt with the question of the interest charged, no mention whatever was made by him in this letter of the fact that there had been a verbal agreement as to a charge of 6 per cent interest.
In my opinion therefore the finding of fact of the learned Chief justice as to the non-existence of this verbal agreement, was amply supported by the evidence before the Court, and I see no reason to dissent from such finding of fact.
In dealing with heading (2), Mr. Phipps submitted that the defendants had no authority for charging fluctuating interest and capitalising such interest with monthly rests as had been done in the present case. He contended therefore that the learned Chief Justice was wrong in holding that the rates of interest charged and the practice adopted of charging compound interest with monthly rests were in accordance with the universal custom of Banks in this Colony. He contended that in order to establish a custom, it was necessary to prove that the custom was notorious and also that it was reasonable and legal, and referred us to numerous authorities in support of his contention.
The law is very clearly set out in Roscoe’s Evidence in Civil Actions, 19th Edition at page 21, as follows :—
” The usage must be shown to be certain and reasonable and so universally acquiesced in that everybody in the particular trade knows it, or ought to know it, if he took the pains to enquire.”
In proof of custom the learned Chief Justice had before him the evidence of Mr. Kirk, the Manager of the Accra Branch of the defendants’ Bank and also the evidence of Mr. Passells, Accountant to the Accra Branch of Barclay’s Bank Limited.
In the course of his evidence, Mr. Kirk states as follows :-
” The usual rate of interest against overdraft accounts secured by mortgage would be 10 per cent compound interest. Simple interest is never charged on such accounts. Compound interest is charged with monthly rests invariably—that is in accordance with the Bank’s custom.”
Mr. Passells in the course of his evidence stated as follows :-
” I have had 13 years experience of overdrafts in current accounts allowed by the Bank secured by legal mortgages on local properties. 10 per cent is the usual rate of interest charged on such overdrafts with monthly rests, interest at the end of each month is carried to the debtor’s overdraft account and increases the capital on which interest is charged for the
follow* month. The same rule applies in Nigeria and S.
Sierra Leone. Banking business is carried on, on same lines in Para
all three West African Colonies.”B.B.W.A.
Mr. Phipps referred us to the case of Moore v. Vougkton, 1 Mk= Stark. 487, in which in an action by Bankers for money lent, the Ag: c.j. Court held it was not sufficient to show that it was the general
custom of the house to charge interest calculated upon half yearly rests without also showing that defendant knew that such was the position, and to the Canadian case of Standard Bank v. Brodreckt referred to at page 265 of Volume 3 of the British and Empire Digest, where in an action to recover an overdrawn account compound interest at 6 per cent per annum, with monthly rests, was disallowed. In the first case it will be seen that the action was not in respect of an overdraft, but was in respect of money lent. In the second case, not having the report, it is impossible to say upon what grounds the judgment was based.
In the recent case, however, of Inland Revenue Commissioners v. Holder (1931) 2 K.B. 81, where the previous cases on the subject were considered, Lord Hanworth, Master of the Rolls, in the course of his judgment stated as follows :—
” The decision of the Commissioners was based upon the judgment in Parrs Bank v. Yates (1898) 2 Q.B. 460. The case is important for it recognises the system of bankers in turning interest intocapital as usual and binding on the parties who have acquiesced in it. It seems to be a question in each case whether the customer did acquiesce in it. (See Fergusson v. Fyffe 8 Cl. and F. 121, and Spencer v. Wakefield (1887) 4 T.L.R. 194). The plan of capitalising interest at the end of each half year was adopted by bankers in order to enable them in effect to secure what is usually termed compound interest, which could not have otherwise been claimed by reason of the usury laws.”
It is clear from this judgment that the custom of charging compound interest with rests is a well recognised custom of Bankers in England.
In my opinion the notoriety of the custom in this Colony was sufficiently proved by the evidence of the representatives of the only two banks carrying on business in the Gold Coast, and it is quite clear from Exhibit ” R,” to which I have previously referred, that the plaintiff must have been fully aware that he was being charged interest in accordance with this custom.
As to the question of the reasonableness of the custom, according to the evidence of Mr. Kirk the Bank would gain only £23 a year by charging compound interest with rests instead of simple interest, on £5,000.