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 Bankers­Notoriety of custom-Acquiscence.

In an action brought by a customer against his Bankers for an account to bJ 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 :-

1.That there had been no over payments by the plaintiff to the defendants. 2. That the money paid by the plaintiff to the defendants to settle his over-drawn current account was not paid by mistake.

3. 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.

4. 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-Respondents. The following judgments were delivered:-

MICHELIN, ACTING C.J. THE GOLD COAST COLONY.  8 per ce

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 lIth 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 :-

(1) Question of verbal agreement with Bank for overdraft in January, 1918.

(2) Was the Bank justified in charging 10 per cent compound interest with monthly rests?

(3) Was there acquiescence on the part of the plaintiff in regard to such charges ?

(4) Was the account closed on the 17th August, 1921 ?

(5) 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 overdrawm 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 following note in pencil being made under this entry" 8 per cent excess.In dealing with this matter, the learned Chief Justice in the course of his judgment stated as follows :-   

                        "It is at once apparent therefore that the course of

business between 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 not 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? Interest 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 alia as follow~ :-

" In reference to my account you will observe that from the business I have done with you from 1918 to 192~, 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 running 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 :-

II The usage must be shewn 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 :-

II 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 :-

II 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, illiterate 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 following month. The same rule applies in Nigeria and s. D. Sierra Leone. Banking business is carried on, on same lines in Papoe all three West African Colonies.

. Mr. Phipps referred us to the case of Moore v. Voughton, 1 Stark. 487, in which in an action by Bankers for money lent, the 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. Brodrecht 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 6t 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 into capital as usual and binding on the parties who have acquiesced in it. It seems to be a question ill 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.

By consent of Counsel on each side a document prepared by the Manager of the defendants' bank was admitted in evidence before us showing that the difference between the interest on £100 per one year at 10 per cent per annum, and the compound interest with monthly rests at the rate of 10 per cent on such sum for a similar period was only 9s. 8d. In view of the high rate of interest in accordance with native custom charged to natives of this Colony, as stated by the leaned Chief Justice in the course of his judgment, I agree with him that the rate of interest at 10 per cent with monthly rests was not an unusually high rate of interest.

This ground therefore fails.

Dealing next with heading (3). In dealing with this question, Mr. Phipps referred to pages 54 and 57 of the record where the leaned Chief Justice dealt in some detail with the question of the periodical rendering of the plaintiff's pass book as constituting acquiescence on his part, and where after considering the various authorities he came to the following conclusion :-

" I shall not, however, in view of the legal divergence of opinion in the matter take it to be an estoppel, but it affords evidence and very strong evidence of the plaintiff's knowledge of what was going on and acquiescence therein. In the case of Bruce v. Hunter, 3 Camp. 467, where an agent who has advanced money for his principal in effecting insurances and other business had charged interest and at the end of the year had made a rest and added the interest due to the principal, Lord Ellenborough said it was fair and reasonable that the defendant should pay interest in the manner charged, and that the interest to which he had not objected for a number of years afforded sufficient evidence of a promise on his part to pay interest. These words apply' mutatis mutandis' in their entirely in this case."

Learned Counsel then referred us to page 35 of the record, where Mr. Kirk in the course of his evidence mentioned two instances in which it appeared from the Bank's ledger that the plaintiff's pass book had been forwarded to him by the Bank. He also submitted that there was nothing in the pass book to show that compound interest had been charged. He also referred to the case of Chatterton v. London and County Bank, referred to in volume 3 of the British and Empire Digest at page 244, in which Lord Esher in the course of his judgment held that there was no duty on the part of a customer to refer to his pass book, which is sent to him by the Bank.

He submitted that the only evidence in the Court below as to acquiescence being the periodical rendering of the plaintiff's pass book, unless knowledge on the part of the plaintiff could be presumed the finding of the leamed Chief Justice as to acquiescence was not justified. In considering the question of the pass book, the evidence of the plaintiff which appears at page 23 of the record is as follows :-

" I don't deny I may have had my pass book out in March, 1918-May, 1919- June 1919, December, 1919-May. 1920, September, 1920, September, W21-November, 1921, January, April, July, August, December, 1922, April, 1927-September, 1929. I used to have my pass book out every now and then but kept no date. I looked generally to my pass book when I had it out and saw the interest debited but did not check it " ;

and this must be considered together with the evidence of Mr. Kirk to which I have referred. I t is clear from this evidence that the plaintiff received his pass book and had the opportunity of examining it on many other occasions than those mentioned by Mr. Kirk.

On page 24 of the record, in the course of his evidence, the plaintiff admitted that he was an acute business man, and from the passage in Exhibit " R " to which I have previously referred, it is clear that the plaintiff was fully aware of the fact that heavy interest was running from 1918, and not only was it running, but it was also running by the month. He must therefore have known of the monthly rests of interest. It is also clear from Exhibit" F" a letter dated the 24th August, 1923, written by him to Mr. Akiwumi Barrister-at-Law, that he knew as far back as 1923 that he had to

pay 10 per cent interest. It is also clear from his letter to the London Office, exhibit " X " to which I have previously referred, that he knew he had to pay high interest with monthly rests.

Then again, on referring to a letter dated the 17th August, 1921, from the Bank to the plaintiff which was admitted in evidence as Exhibit" I," which reads as follows :-

 

"DEAR SIR,

•• Sometime ago, our Head Office advised us that they were not willing to continue giving overdrafts against mortgage at rates of interest less than 10 per cent.

" As your mortgages only permit us to charge 8 per cent, we shall be obliged if you will confirm to us that you agree to the increased charge .

•• We hope to be able to advise you at an early date that the rates of interest have been reduced again.

Yours faithfully,

J. C. PATRICK, Manager .••

and to the reply from the plaintiff dated the 18th August, 1921 (exhibit" J ") in which the plaintiff stated as follows :-

•• I accept and confirm the terms of your letter under reply, and will confine myself to the rate of 10 per cent until your Head Office directs the necessary reduction as they may think fit in the near future.

Yours faithfully,

S. DAVID PAPPOE."

it will be seen that the plaintiff admitted the defendants' right to charge interest at the rate of 10 per cent and this act on his part constitutes knowledge and acquiescence.

In my opinion there was overwhelming evidence in the Court below, apart from the question of the pass book, to justify the Chief Justice in coming to the conclusion that there was knowledge and acquiescence on the part of the plaintiff in regard to the interest which was being charged him by the defendants.

I see no reason therefore to dissent from this finding of fact.

Dealing next with heading (4), Mr. Phipps referred to the three mortgages, dated 11th July, 1919, 15th September, 1919 and 17th August, 1921, respectively which were admitted in evidence as exhibits" D " " E I' and "H." He submitted that the wording of these deeds did not give the Bank the right to charge capitalised interest with monthly rests, but they were only justified in charging simple interest at the rate of 8 per cent per annum. Exhibit" H " was a mortgage to secure an overdraft of £2,000. He further submitted that before the execution of exhibit "H," the plaintiff's account so far as £6,000 was concerned, was closed.

At the date of that deed the plaintiff had paid in the whole of his fixed deposit. As far as that amount of £6,000 was concerned, therefore, the position between the parties was that of mortgagor and mortgagee, and the Bank could not therefore charge more than 8 per cent interest.

As regards exhibits" I " and" J " he contended that a mere verbal agreement could not vary the terms of the mortgages which were deeds under seal.

In dealing with the question of these mortgages, the learned Chief Justice at page 58 of the record stated as follows :-

" Now of course it is obvious that when a solemn deed has been entered into between banker and customer under which the customer conveys securities to the Bank by way of mortgage for securing a certain sum with interest at a certain definite rate, the relation between the customer and the banker is • prima facie' one of mortgagor and mortgagee, and the banker is precluded from charging more than the interest prescribed in the deed so long as it regulates the relations between the parties. The mortgages in this case, however, were all of them given not for the purpose of securing an ascertained balance of an overdrawn account but to secure a further fluctuating overdraft up to a certain amount. The recitals of the deed did not correspond with the actualities since in both" D " and" E " it was expressly stipulated that the mortgagor should repay any sums advanced together with the usual interest, commission and lawful bank charges, and it was only if after the account was closed any balance remained due to the Bank that it was stipulated that interest at 8 per cent should be paid on that balance. The account had in fact never been closed and the condition had not therefore arisen under which interest at 8 per cent became payable. The deed of 17th August, 1921, moreover was expressed to be supple­mental to the two previous deeds and provided for payment of interest in exactly the same manner as had been done in them .

•• Construing the three deeds together, therefore, I am of opinion that notwithstanding the recitals in the deed of 17th August, 1921, I am bound to hold that the Bank were entitled to charge interest on the whole of the current account."

On referring to exhibit" A " which appears at page 97 of the ~. D. record it will be seen that in April, 1921, the sum of £6,000 was  still shewn in the plaintiff's current account as not being withdrawn.

In my opinion therefore the learned Chief Justice was right in holding that at the date of the execution of exhibit "H" the Ag: c.]. plaintiff's account had not in fact been closed, and therefore the position of mortgagor and mortgagee did not arise.

As regards exhibts " I " and " J," the learned Chief Justice in the course of his judgment stated as follows :-

" In their view of what the mortgages permitted, both the plaintiff and the defendants were, I consider, mistaken, but the important thing is that the plaintiff by letter ".J" confirmed the previous charge of 10 per cent and agreed to the same rate being charged in future until the Head Office directed the necessary reduction. Such an agreement was of course a perfectly valid variation of the contract by mutual agreement, the consideration of which to the plaintiff was that the Bank would not call in the money if he agreed to pay the interest, and it would avail to alter the deed whether the deed had the effect which plaintiff contends or that which I say it had-ie. to allow the Bank to charge the usual interest commission and lawful Bank charges so long as the account was open; 8 per cent when it was closed."

As the validity of the contract created by exhibits" I " and " .J " has been questioned by Mr. Phipps, it will be as well for me to refer to the case of Nash v. Armstrong 10 C.B. (N.S.) 259, in which it was held that parties to a deed can only discharge their obligations by deed, yet they may make a parol contract which creates obligations separate from the deed, and even substantially at variance with the deed. In the present case, the parol agreement created by exhibits " I " and " J " did not vary the contract as between mortgagor and mortgagee but only as between banker and customer, the rate of interest as between mortgagor and mortgagee still remaining the same as in the deeds.

Dealing now with the last heading. It was contended by Mr. Phipps that the plaintiff's current account had been definitely closed on the 18th of November, 1922, in view of the fact that the plaintiff stopped operating his account on that date. He contended therefore that the Chief Justice was wrong in holding that it had only been closed on the 11th of February, 1932, when the plaintiff settled it by paying in the balance then standing in the Bank's ledger.

Apart from the fact that five cheques were proved to have been drawn by the plaintiff as set out at pages 144 and 145 of the record after the 18th of November, 1922, it is clear from Mr. Kirk's evidence which appears at page 35 of the record, where he states that the plaintiff took out his pass book in December, 1922, and to the plaintiff's own admission at page 23, where he stated that he did not deny that he may have had his pass book out in December, 1922, among other dates, that he must have known that his account was not closed on the 18th of November, 1922.