John David Root and Another v. Nanyang Commercial Bank Ltd

Case No.HCMP 1119/1982

Court

High Court CFI

Date28 Jul 1982

Judge—

Case Document

100%Judiciary

HCMP001119/1982

Miscellaneous Proceedings
No.1119 of 1982

The bank's relationship with its deposit account customers qua debtor and creditors was not wholly superceded but merely modified by agreed terms for the deposit --- Agreed terms in a bank passbook for a deposit account were held not to have stipulated for its production as a condition precedent to the bank's liability to repay.

IN THE HIGH COURT OF JUSTICE

Miscellaneous Proceedings
No.1119 of 1982

BETWEEN

	John David Root	1st Plaintiff
	Marie Christina Lacle	2nd Plaintiff
	AND
	Nanyang Commercial Bank Limited	Defendant

__________

Coram: Hon. Liu, J.

Date: 28 July 1982

___________

JUDGMENT

___________

1. At the conclusion of these proceedings, a declaration was made in terms of prayer (a) of the Originating Summons which was not resisted by the defendant, and the defendant bank was directed to forthwith transfer all the outstanding deposit with interests accrued thereon to the plaintiffs or in accordance with their instructions with no orders as to costs. The parties were informed that reasons for my decision would be given at a later stage, which I now do.

2. On the 16th August, 1980, the 1st plaintiff deposited U.S.$9,000 with the defendant bank in an account known as "U.S. Dollars Savings Account" in the joint names of himself and the 2nd plaintiff. A bank passbook was issued therefor by the defendant. Four days later on the 20th August, a further deposit of U.S.$20,000 was similarly made by the 1st plaintiff. At the hearing, these original deposits together with interests thereon accrued were available in the said deposit account with the defendant bank.

3. In September 1980, the 1st plaintiff was arrested in America for his undeclared transfer of U.S.$810,000 from America to the United Kingdom. On the 17th September, 1980, the United States Customs' representative in Hong Kong notified the defendant bank that the United States Customs Service had seized the passbook of the plaintiffs for their U.S. Dollars Savings Account with the defendant bank. It was contended on behalf of the plaintiffs that there was no proven nexus between the alleged transfer to the United Kingdom of U.S.$810,000 and the U.S.$110,000 deposited with the defendant and that in any case the Courts in Hong Kong would not favourably entertain any claim of the United States Customs Service made under a foreign penal code against the lcoal deposit. It was quite unnecessary to have these matters resolved. Suffice it to say that the United States Customs Service had taken no step to claim or freeze the plaintiffs' deposit with the defendant.

4. The plaintiffs had given notice to withdraw. They had established their identity and furnished the bank with full indemnity against any claim arising from or in connection with the demanded repayment. But they were unable to produce the passbook for the deposit account which was still being impounded and retained under seizure by the United States Customs Service.

5. It was common ground that the deposit account was governed by the Rules of the defendant bank which were printed on the passbook in two versions, Chinese and English. There was no indication of preference. The plaintiffs relied on the English version which is as follows:

"(1)	A Savings account may be opened with an initial deposit of not less than US$100 in notes.
(2)	Each depositor will be supplied with a passbook in which will be entered, by the Bank, the amounts deposited and withdrawn. Depositor should examine their passbook carefully before leaving the Bank and satisfy themselves that the entries are correct.
(3)	The Bank will on production of the passbook repay deposits on demand during the hours the Bank is open for business. The depositor is required to file with the Bank a specimen signature for the purpose of identification on withdrawal of the deposit.
(4)	The Bank shall have the right to pay to the depositor any amount withdrawn from the account by any one of the following methods or by combination of any two or more of them at the Bank's entire discretion:
	a.	by payment in U.S. dollar notes;
	b.	by issuing to the depositor a U.S. dollar cheque drawn by the Bank on any bank in the U.S.A.
	c.	by payment in Hong Kong dollar equivalent at such rate of exchange as the Bank may determine.

	(5)	In case a depositor opens a U.S. dollar Savings Account with the Bank by paying in U.S. dollar draft or T/T and requests the Bank to make payment from the account also in U.S. dollar draft or T/T, prior arrangement should be made with the Bank. Otherwise such deposits are to be repaid on U.S. dollar note basis.
	(6)	Interest at such rates as shall be posted in the Bank will be allowed on the balance of the account at the close of business each day and will be credited to the depositor's account half-yearly during June and December.
	(7)	The passbook is for the depositor's reference and does not necessarily indicate the current balance of the account, as deposits may have been made or items charged without entry to the passbook. The Bank's records are accepted as showing the correct balance of the account.
	(8)	Any payment made by the Bank upon the production of a passbook and a withdrawal form bearing the signature or the impression of the seal or the chop of the account holder shall have the same effect as if made to the account holder personally. The Bank will not be responsible for any loss thereby suffered by the depositor or by any third party.
	(9)	Notice in writing should be given to the Bank at once if the passbook or the chop for withdrawing deposit from the Bank is lost, mislaid or stolen. The Bank will not be responsible for any payment made prior to the receipt of such notice.
	(10)	All cheques and other monetary instruments accepted for deposit are credited subject to final payment. The Bank reserves the right to charge the depositor's account with the value of items subsequently unpaid.
	(11)	These Rules are subject to change by the Bank without notice."

6. The Chinese version differs, at least, in its Rule (3), a certified translation of which is set out below:

"(3)

The depositor may, on production of the passbook and prefiled specimen signature, withdraw deposits during the business hours of the bank."

7. The issues may be formulated briefly thus:

	(1)	Whether the Rules for the plaintiffs' deposit account with the defendant had made the production of their passbook a condition precedent to the bank's liability to repay, and
	(2)	If they had, whether the Court should, in exercise of its equitable jurisdiction, come to the aid of the plaintiffs.

8. It is trite law that the relationship of a banker with his deposit account customer is one of debtor and creditor. See Foley v. Hill. ⁽¹⁾ There exists a liability on the part of the banker as a debtor to repay his deposit account customer on demand. Such inherent obligation can be made subject to and conditional upon terms by agreement.

9. By his acceptance of a deposit account, a banker is answerable for the amount outstanding whenever demanded, because by the very nature of that relationship he has contracted to repay the principal and all interests accrued upon notice to withdraw. The proposition that general terms on which a deposit account is established would exclusively define the relationship of the banker and his deposit account customer is plainly unsupportable. Great play was made of a statement on the liability of a banker in relation to a deposit account in paragraph 40, Volume 3 Halsbury's Laws of England, 4th edition at page 33:

"The debt is repayable either on demand or on conditions agreed with the depositor."

It was sought to be argued that once a deposit account was opened on terms agreed, the banker's liability was to be solely regulated by reference to those terms to the exclusion of all other inherent contractual obligations of a banker as a debtor to repay on demand. In substance, it was submitted that the Court was not to examine how much a banker's liability as a debtor had been pruned down by the agreed terms but that the agreed terms alone were to determine the ambit of the banker's rights and obligations.

10. The statement quoted from Halsbury's Laws of England is not, in my view, legitimately capable of that invited construction. It merely postulates a possible modification, by express terms, of the inherent contractual obligations of a banker as a debtor towards his customer on deposit account. Naturally, it is axiomatic that no terms may be agreed which are, in effect, wholly repugnant to the fundamental banker and deposit account customer relationship qua debtor and creditor lest the entire substratum of this banker/ customer contractual association would be up-rooted and extinguished. If any authority is at all needed for the effect of agreed terms on the relative situation of a banker and his deposit account customer qua debtor and creditor, reference may be made to the observation of the Lord Chancellor in Foley v. Hill ^(1a) that the "original character" of the banker in the debtor/creditor relationship was not "divested" by any express stipulation, which was, in that case, one for payment of interest.

11. Therefore, unless the obligation of the defendant bank to repay was unequivocally made subject to the production of the passbook, the defendant's inherent liability to repay on demand as a debtor to the plaintiffs should not be diminished to their prejudice as deposit account customers qua creditors. Example of an express stipulation for making the production of a passbook a condition precedent to the bank's liability to repay on a deposit account may be found in Atkinson v. The Bradford Third Equitable Benefit Building Society,(2) in which one of the terms contained in the passbook was:

"No money will be paid out except on production of the investor's book, and he must either attend personally or send a written authority."

A further example is given in Bagley v. Winsome and National Provincial Bank Ltd. ⁽³⁾ In that case, the contract by which the bank accepted deposit accounts included the following term:

"Personal application must be made and this book produced at the bank when any money is withdrawn."

In both of these cases, it was held as being part of the bargain made by the parties to the banking transaction that the production of the passbook at the bank or the Building Society was a condition precedent to their respective liability to repay.

12. In the instant case, the Rules for the U.S. Dollar Savings Account of the plaintiffs' have clearly fallen far short of making the surrender of the passbook a condition precedent to the bank's liability to meet a withdrawal demand. On the defendant's liability, Rule (3) merely states that the bank will, on production of the passbook, repay on demand. It does not stipulate that the bank will only repay on the production of the passbook, nor does it provide that the bank will not repay unless the passbook is produced. The other Rules are quite immaterial. Rule (4) lays down the methods of payment upon withdrawal, and it is noteworthy that the language there used "shall have the right" is imperative as contrasted with the permissive phraseology in Rule (3). Rule (7) makes the entries in the passbook, at best, only prima facie evidence of indebtedness subject to "the correct balance" in the bank's records. Rule (8) confers protection on the bfank against any liability for payment against the production of the passbook coupled with a properly signed withdrawal slip. Rule (9) prescribes for notice to be given in the event of the passbook or the chop for withdrawing slips being "lost, mislaid or stolen". Rule (9) also absolves the bank from responsibility for any payment made prior to actual receipt of such notice. It does not introduce any peremptory need for the production of the passbook in the withdrawal of the deposit. None of these or the other Rules throw any guiding light on the construction of Rule (3).

13. Moreover, the Chinese version of Rule (3) is couched in entirely different terms. The English version refers to the bank's liability to repay, but the Chinese version-seeks to regulate the depositor's right to withdraw.

14. The plaintiff relied on the English version and would call in aid the Chinese version in the case of any ambiguity. Counsel of the defendant bank replied to submissions made primarily on the English version, but the Chinese version was understandably not disowned by the defendant.

15. Both the English and the Chinese versions make reference to the production of the passbook, but none of the provisions is mandatory in terms for its production. The words used are "will on production of the passbook repay" in the English version and "may on production of the passbook withdraw" in the Chinese version. In In re Dillon, ⁽⁴⁾ a similar but less permissive stipulation was considered by Cotton L.J. as not having created a condition precedent to payment by the bank. There, part of the written terms was:

"When the money is withdrawn or the interest paid the depositor must sign the cheque on the back thereof, first affixing a penny stamp." In conclusion, production of the plaintiffs' passbook has not been, in my view, made a condition precedent to the defendant bank's liability to repay.

16. The plaintiffs' passbook had been and was, at the hearing, still being withheld by the United States Customs Service. The defendant bank was duly notified. To the bank's knowledge, as deposed to in the affirmation of its manager, Mr. Lee, the lst plaintiff had up to, at least, April this year been kept in custody by the United States Authorities for "alleged criminal offences". There was no forecast as to any likelihood or unlikelihood of the passbook being one day released by the United States Customs Service and, if it would be, the approximate date of the release. There was also no evidence of any recent enquiry or demand made for its return or of the reaction of the United States Customs Service. The Court was not informed of what steps, if any, had been taken to retrieve the passbook so retained. But in my view, in the circumstances as known the plaintiffs had given sufficient explanation as to why their passbook was not forthcoming in their present demand for repayment. In my judgment, none of the Rules, in particular Rule (3), required production of the passbook as a condition precedent to the bank's liability to repay and the defendant's liability in its "original character" as a debtor to repay on demand, had not been effectively excised therefrom by any of the Rules.

17. I need not consider the question of "loss" and the Court's equitable jurisdiction for assisting the plaintiffs in recovering their deposits. It was alternatively submitted by counsel for the plaintiffs that the passbook had been lost to them in the sense of a loss in possession and control and that even if its production had been explicitly made a condition precedent to the bank's liability to repay, the Court should not allow its absence "to stand in the way of the depositors reclaiming their money". ⁽⁵⁾ However, whilst I take the view that the plaintiffs had, in the circumstances, sufficiently accounted for the non-production of their passbook, they had failed to establish it as having been lost. The passbook had been seized and not forfeited. There was no question of spoliation or fraudulent suppression. At the hearing, the passbook was still in the hands of the United States Customs Service. I find in Mr. Li's submission equating loss with permanent deprivation a formidable argument. Obviously, temporary inaccessibility to a bank passbook is not a case of loss, as understood in its proper context, which had not, in my view, been incontrovertibly established.

18. Of the four prayers in the Originating Summons, prayers (b) and (c) in the alternative were no longer pursued at the conclusion of the proceedings. Prayer (a) for declaration was accordingly granted unopposed, and I further directed the defendant bank to forthwith transfer the deposit in terms of prayer (c) as amended.

	(B. LIU)
	Judge of the High Court

(1) [1848] II H.L.C. 28.

(1a) [1848] II H.L.C. 28 at p.40.

(2) [1890] 25 Q.B.D. 377 at p.378.

(3) [1952] 2 Q.B. 236 at p.239.

(4) [1890] 44 Ch. D. 76 at p.p.76 and 81.

(5) 3 Halsbury's laws of England, 4th ed. para.40, p.33.

Representation:

Mr. I. Paine instructed by Messrs. Robertson, Double & Boase for the Plaintiffs.

Mr. Andrew Li instructed by Messrs. Gallant Y. T. Ho. & Co. for the Defendant.