BANKER CUSTOMER RELATIONSHIP 11252020 SLIDE PREPARE BY DEBORAH

BANKER – CUSTOMER RELATIONSHIP 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 1

QUESTION • WHO IS A CUSTOMER? 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 2

Who is a customer? • “Customer is undefined in the legislation and it has been necessary to decide whether the rogues and others who bank such cheques fall within the ambit of the term” (Cranston, 2002). • We try to define a customer in accordance with case law in the following terms: • Non-account holders and professional advice • Duration • Deposit Only • Knowledge and consent 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 3

Can non-account holders be deemed as customers of a bank? CASE: Great Western Railway v London and County Banking Co. [1901] AC 414, 425 FACTS: • A rate collector had, over 20 years, been cashing cheques at the bank. He himself had no account with the bank. Is he a customer of the bank? HELD: • per Lord Lindley "I cannot think that Huggins was in any sense a customer of the bank; no doubt he was known at the bank as a person accustomed to come and get cheques cashed, but he had no account of any sort with the bank. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 4

Are non-account holders whom the bank gives professional advice, customers of the bank? CASE: Woods v Martins Bank Ltd. [1958] 1 QBD 55 FACTS: • Bank gave advice to the plaintiff who never had account with the bank. He claimed damages against the bank for negligent advice. HELD: • per Lord Salmond • "No doubt the defendant. . . could have refused to advise the Plaintiff, but, as he chose to advise him, the law in these circumstances imposes an obligation on him to advise with reasonable care and skill. " 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 5

CASE: Warren Metals Ltd. v. Colonial Catering Co. Ltd. [1975] 1 NZLR 273, 276. HELD: • per Mc. Mullin J • “A customer is someone who has an account with a bank or who is in such a relationship with the bank that the relationship of banker and customer exists, even though at that stage he has no account. " 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 6

CASE: Bank of West Africa Ltd. v. Appenteng& Anor. [1972] 1 GLR 153 FACT: • Respondent, who had no account with the bank, claimed damages against the Bank for negligence advice to cross-fire cheques. HELD: • Court did not address the issue of “customer”. The case was decided on another ground 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 7

Is a customer one with only deposit account with the bank? CASE: Ladbroke and Co. v. Todd (1914) 30 TLR 433 FACT: • A thief deposited a stolen cheque with the bank. That was his only transaction with the bank. He made no withdrawals. HELD: • per Bailhache J • "There must be a time when he began to be a customer. His Lordship thought a person became a customer of a bank when he went to the bank with money or a cheque and asked to have an account opened in his name and the bank accepted the money or cheque and was prepared to open an account in the name of that person. He thought the person became a customer then, and after that he was entitled to be called a customer of the bank. He did not think it was necessary that the person should have drawn any money or even that he should be in a position to draw money. He thought such person became a customer the moment the bank received the money or cheque and agreed to open an account. " 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 8

Can a person whom an account is opened for without his consent be considered a customer? CASE: Robbinson v. Midland Bank (1925) 41 TLR 402. FACT: • The account was opened in the name of the Plaintiff without his consent. The Plaintiff claimed the money from the bank and the bank refused. The Plaintiff sued. HELD: • That the Plaintiff was not a customer and could not compel the Respondent bank to pay out the money to him 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 9

CASE: Mc Elroy v. Belfast banking Co. Ltd. [1935] J A. C. 2. FACT: • Father opened an account in the names of himself and his son (the Plaintiff). The account was opened in the name of the Plaintiff without his consent. The Plaintiff claimed the money from the bank and the bank refused. The Plaintiff sued. HELD: • That the son did not become a customer. He had not opened the account himself. Neither did he ask the father to open the account for him. Therefore he did not become a customer. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 10

Is banker –customer relationship limited by duration? CASE: Commissioner of Taxation v. English Scottish and Australian Bank Ltd. (1920) A. C. 683 FACT: • A thief stole a cheque from the Commrs, opened an account with the bank and lodged the cheque therein. The cheque cleared, he cashed it and disappeared. Was the thief a customer? HELD: • per Lord Dunedin • "Their Lordships are of opinion that the word "customer“ signifies a relationship in which duration is not of the essence. A person whose money has been accepted by a bank on the footing that they undertake to honour cheques up to the amount standing to his credit is, in the view of their Lordships, a customer of the bank in the sense of the statute, irrespective of whether his connection is of short or long standing. The contrast is not between an habitue and a newcomer, but between a person for whom the bank performs a casual service, such as, for instance, cashing a cheque for a person introduced by one of their customers, and a person who has an account of his own at the bank. " 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 11

Definition of a customer per Ross Cranston (2002) • “The concept of a customer is used in this book in a wider sense to describe anyone who deals with a bank in relation to a banking service. Those with accounts are customers, but so too are borrowers and those using the bank for financial advice, fund management, securities and derivatives dealings, and so on. Customers can be other banks and market counterparties, commercial customers, and private customers. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 12

BANKER-CUSTOMER RELATIONSHIP • The Banker-Customer relationship emanates mainly from the permissible activities of banks as stipulated in section 11 (1) of Act 673 and the banking business as stated under interpretation of section 90 of Act 673. • The relationship between a bank and its customers can therefore be classified as follows: • Debtor - Creditor Relationship • Bailor - Bailee Relationship • Trustee - Beneficiary 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 13

• Agent – Principal Relationship • Advisor – Client Relationship 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 14

Debtor and Creditor Relationship • This relationship is a very important relationship since it has to do with the core business of banking. In 1848, The House of Lords held in Foley v Hill that the relationship that existed between the banker and the customer was essentially a debtor –Creditor relationship. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 15

• CASE: Foley v Hill • FACTS: the appellant in 1829 opened a bank account with the respondent bankers. Two further deposits were added in 1830 and in 1831 interest was still added. In 1838 the appellant brought proceedings against the respondent bankers seeking recovery of both the principal and interest. The counsel cleverly tried to argue that it was the duty of the respondent bankers to keep all the accounts up to date at all times and thus there was more to this relationship than that of debtor and creditor. • Held: • The case decided that a banker does not hold the sums in a bank account on trust for its customer. Instead the relationship between them is that of debtor and creditor. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 16

The Lord Chancellor Cottenham said the following in his judgement in Foley v Hill • “Money, when paid into a bank, ceases altogether to be the money of the principal; it is by then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid to a banker is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 17

• he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands. • That has been the subject of discussion in various cases, and that has been established to be the relative situation of banker and customer. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 18

• “The relationship between a banker and customer, who pays money into the bank, is the ordinary relation of debtor and creditor, with a superadded obligation arising out of the custom of bankers to honour the customer’s draft; and the relationship is not altered by an agreement by the banker the interest on the balances in the bank. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 19

• CASE: Libyan Arab Foreign bank v. Bankers Trust Co. [1989] QB 728 • Facts: US President Ronald Reagan places a Presidential order to freeze money that was deposited in the Bankers Trust Company. The Libyan Arab Foreign Bank sought to recover the funds. “It is elementary, or hornbook law to use an American expression, that the customer does not own any money in the bank. He has a personal and not a real right. Students are taught at an early stage of their studies in law that it is incorrect to speak of ‘all my money in the bank. ’” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 20

Agent – Principal Relationship • The banker acts as an agent of the customer (principal) by providing the following agency services: • Buying and selling securities on his behalf, Collection of cheques, dividends, bills or promissory notes on his behalf. • The banker as an agent performs many other functions such as payment of insurance premium, electricity and other utility bills etc. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 21

• “It is well established that the normal relation between a banker and his customer is that of debtor and creditor, but it is equally well established that quaod the drawing and payment of the customer’s cheques as against money of the customer’s in the banker’s hands the relation is that of principal and agent. The cheque is an order of the principal’s addressed to the agent to pay out of the principal’s money in the agent’s hands the amount of the cheque to the payee thereof. ” • CASE: Westminster Bank v. Hilton (1926) 43 TLR, 124 per Lord Atkinson 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 22

Bailor – Bailee Relationship • Regarding the bailor-bailee relationship between bank and customer when the bank is rendering safe custody services, its relationship with the customer is that of bailor/bailee. • A bailment arises whenever one person is put voluntarily and knowingly in possession of goods which belong to another. • In general terms, bailment signifies a distribution of ownership and possession between different persons. • The bailee (in this case the bank) has possession and the bailor (the customer) has ownership. • The banker is a bailee when the customer deposits valuables, bonds or other documents with the bank. As the custodian of the customer’s assets, the banker is liable for any loss suffered by the customer due to his negligence. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 23

Trustee and Beneficiary • Regarding the trustee- beneficiary relationship between bank and customer, a bank may be liable as constructive trustee if it either: • receives trust funds with actual or constructive notice that they are trust funds and that the transfer of the funds to the bank is a breach or trust, or • knowingly assists a trustee of the trust to dishonestly misapply trust funds. "Knowingly" includes: actual knowledge, wilfully shutting one's eyes to the obvious, wilfully failing to make inquiries, knowledge of circumstances would indicate the facts to an honest and reasonable person or would put such person on inquiry. • Belmont Finance Corporation v Williams Furniture Ltd (no. 2) (1980) CA There are several degrees of knowledge, classified by Gibson J in Baden v Societe Generale [1983] BCLC 325 : • There is need to look at (a) knowledge (b) receipt and (c) trust property as qualifying factors 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 24

A. Knowledge • 1. actual knowledge; • 2. wilfully shutting one's eyes to the obvious (turning a blind eye); • 3. wilfully and recklessly failing to make such enquiries as an honest and reasonable person would make; • 4. knowledge of circumstances which would indicate the facts to an honest and reasonable person; • 5. knowledge of circumstances which would have put an honest and reasonable person on inquiry. • Re Montagu [1987] held that only knowledge types 1. , 2. and 3. would incur liability since he did not believe mere careless was enough to make somebody a constructive trustee. He also warned against using comparisons with the doctrine of notice. • Vinelott J in Eagle Trust Plc v SBC Securities Ltd [1992] 4 All ER 488 submitted that 4. and 5. should not be applied in commercial transactions since they would require parties to be unduly suspicious. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 25

B. Receipt • To be a constructive trustee the person receiving the trust property must have done so for his or her own use and benefit. If the bank used the money itself e. g. to pay off an overdraft then it was benefiting and so could be a constructive trustee but if the money was merely being held passively in the account it could not be a trustee. • Agip (Africa) Ltd v Jackson [1989] 3 WLR 1367 C. Trust Property • The stranger must have received trust property in breach of trust to be held to be a constructive trustee. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 26

Advisor - Client Relationship • When a customer invests in securities, the banker acts as an advisor. • The advice can be given officially or unofficially. • While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client. • Case: Woods v Martins Bank Ltd. [1958] 1 QBD 55 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 27

Other Miscellaneous Relationships • Other miscellaneous banker-customer relationships are as follows: • Obligation to honour cheques : As long as there is sufficient balance in the account of the customer, the banker must honour all his cheques. The cheques must be complete and in proper order. They must be presented within six months from the date of issue. However, the banker can refuse to honour the cheques only in certain cases (Akwasi Boakye Osei v. Standchart Ghana Limited, 2014); London Joint Stock Bank Limited v Macmillan and Arthur (1918) • Secrecy of customer's account : When a customer opens an account in a bank, the banker must not give information about the customer's account to others (section 85 of Act 673). • Banker's right to claim incidental charges : A banker has a right to charge a commission, interest or other charges for the various services given by him to the customer. For e. g. an overdraft facility. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 28

• Duty of care owed in tort: In tort law, a duty of care is a legal obligation, which is imposed on an individual requiring adherence to a standard of reasonable care while performing any acts that could foreseeably harm others. . The claimant must be able to show a duty of care imposed by law which the defendant has breached. • Case: Donoughe v Stevenson – The neighbor’s Principle 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 29

London Joint Stock Bank Limited v Macmillan and Arthur (1918) • Facts: • a partnership M and A were customers of a bank. A clerk in the employment of the firms submitted to one of the partners for signature a cheque payable to the firm or bearer made out of 2 pounds in figures, but without any amount in words. After the partner has signed the cheque, the clerk altered the figures by inserting 1 and 0 before and after the 2 to make the amount 120 pounds and he wrote in the same amount in words. He obtained 120 pounds in cash on presenting the cheque to the bank. M and A contended that in signing the cheque the partner had authorised a payment of 2 pounds and only that sum should be debited to the account. • It was held that a customer owes a bank a duty of reasonable care in drawing cheques to prevent the bank being misled by a cheque altered after it had been signed. The customer is liable to the bank for any loss resulting from a breach of that duty. The bank was entitled to debit actual payment of 120 pounds to the firms. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 30

Donoghue v Stevenson [1932] AC 562 House of Lords • Mrs Donoghue went to a cafe with a friend. The friend brought her a bottle of ginger beer and an ice cream. The ginger beer came in an opaque bottle so that the contents could not be seen. Mrs Donoghue poured half the contents of the bottle over her ice cream and also drank some from the bottle. After eating part of the ice cream, she then poured the remaining contents of the bottle over the ice cream and a decomposed snail emerged from the bottle. Mrs Donoghue suffered personal injury as a result. She commenced a claim against the manufacturer of the ginger beer. Held: Her claim was successful. This case established the modern law of negligence and established the neighbour test. Lord Atkin: • "The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer's question " Who is my neighbour ? " receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then in law is my neighbour ? The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question. " 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 31

QUESTION • Is banker-customer relationship contractual? If so, are there some implied terms therein? What are they? 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 32

CASE: Joachimson v. Swiss Banking Corporation [1921] 3 K. B. 110 • FACTS: Siegfried Joachimson, Jacob Joachimson and L. E. Marckx jointly operated a business in Manchester as a partnership. L. E. Marckx was a naturalised British citizen, but the other two partners were German nationals. The firm opened and operated a bank account with the Swiss Bank Corporation. On 1 August 1914 Siegfried Joachimson died. Under English partnership law at the time, this had the effect of dissolving the partnership. However three days later, on 4 August 1914, World War I broke out, and Jacob Joachimson returned to Germany. The firm's account with the bank was dormant for the duration of the war; the case report suggests that this might have been because of legal prohibitions relating to property of enemy aliens. After the war, the English partner, L. E. Marckx, tried to wind up the affairs of the partnership, and sought repayment of the £ 2, 312 held in the bank account from the bank. The bank refused to repay the sums in the account arguing that either (i) the firm had made no demand for repayment of the sums, and so they were not due; or in the alternative (ii) that if the right to repayment arose upon the death of Siegfried Joachimson, then it was now barred by the statute of limitation. • The case report indicates that there was a great deal of procedural wrangling at first instance in relation to whether the claim could be brought by an individual partner or had to be brought in the name of the firm. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 33

• Bankes L J held: “It seems to me impossible to imagine the relation between banker and customer, as it exits today, without the stipulation that, if the customer seeks to withdraw his loan, he must make application to the banker for it. . . ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 34

Terms of Contract between a Bank and a Customer – Joachimson v. Swiss Bank • Bank undertakes to receive the deposits from and collect bills for the customer; • These monies are not debts owned by the bank to the customer; • Bank promises to repay the customer on demand (at the account branch and within working hours; • Bank promises to not shut down within the foreseeable future; • Customer undertakes to exercise care in executing written order to prevent fraud and forgery. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 35

QUESTION - DISCUSSION 1. What’s the effect of modern technology on the requirement in Joachimson that a customer may only take his money back at his branch and within working hours? 2. How does the creditor-debtor relation between a bank and a customer play out when the customer overdraws his account? 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 36

DUTIES OF A BANK 1. To receive deposits from and collect bills for the customer • “The bank undertakes to receive money and to collect bills for its customers’ account” – Joachimson v. Swiss Bank 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 37

CASE: Sierra Leone Telecommunication Co. Ltd. v Barclays Bank plc [1998] 2 All ER 821 • “It is a basic obligation owed by a bank to its customer that it will honour on presentation cheques drawn by the customer on the bank, provided that there are sufficient funds in the customer’s account to meet the cheque, or the bank has agreed to provide the customer with overdraft facilities sufficient to meet the cheque. Where the bank honours such a cheque, it acts within its mandate, with the result that the bank is entitled to debit the customer’s account with the amount of the cheque or other instruction. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 38

CASE: Bodenham v. Hoskins [1943 – 60] All ER 692, 694 per Kindersley V. C. • “In a naked case of a banker and customer, the bank only looks to the customer in respect of the account opened in that customer’s name. Whatever cheques that customer chooses to draw the banker is to honour. He is not to inquire for what purpose the customer opened the account; he is not to inquire what the monies are that are paid into the account, he is not to inquire for which purpose the moneys are drawn out of the account. That is the plain general rule as between banker and customer” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 39

QUESTION - DISCUSSION • Should bankers be empowered by law to inquire into the sources of their customers’ deposit? • Remember KYC!!!!!!! • Case: Akwasi Boakye Osei v. Standard Chartered Bank (2014) 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 40

Question • At what time will the banker be said to have taken custody of the customer’s cash? • See: Balmoral Supermarket Ltd. v. Bank of New Zealand (1974) 2 LLOYDS REP 164): cash had been emptied from a bag on the bank counter and the teller had begun to count a bundle of notes. Thieves raided the bank at this point and stole the uncounted cash. The customer sued the bank for the money taken by the thieves. • It was held that the claim should fail, as the bank was not accountable for cash paid in until it had been checked. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 41

2. To honour the customer’s cheques • This is subject to the requirements that: • there’s sufficient funds in the customers account; • S. 74, Act 55: “The duty and authority of a banker to pay a cheque drawn on him by his customer are determined by— • (a) countermand of payment; • (b) notice of the customer's death. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 42

3. Bank’s duty of Confidentiality • “A Bank owes the customer a legal (not merely a moral) duty of confidentiality arising out of an implied term of the bank-customer contract” • Tournier v. National Provincial and Union Bank of England[1924] 1 KB 461: T who had incurred betting losses, was overdrawn on his account with the defendant bank. He promised to pay off his overdraft by weekly instalments but he failed to do so. The bank then telephoned his employer with whom he had temporary job to find out his private address. The manager mentioned to the employer that T had been gambling. When three months’ period of his employment expired, the employer refused to extend T’s employment. T sued the bank for slander and for breach of an implied contract not to disclose the state of his account and his transactions. It was held that the bank was liable for breach of contract. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 43

Section 84, Act 673 • “A director, an officer or any other employee of a bank shall not disclose an information relating to the affairs of a customer with that bank except where the disclosure of the information is required • by law or • by a court of competent jurisdiction or • the Bank of Ghana or • is authorised by the customer or is in the interests of that bank. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 44

Section 19, Economic and Organised Crime Act, 2010 (Act 804) • “The Executive Director or an authorised officer of the Office may by notice in writing require: • (a) a person or a representative of an entity whose affairs are to be investigated, or • (b) a person who in the opinion of the Executive Director is a proper person to assist with an investigation being conducted by the Office • to appear before the Executive Director at a specified date and place to answer questions or furnish the Office with information related to a matter relevant to the investigation. ” 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 45

• Also see Section 221, Companies Act, 1963: • Appointment of Inspector on Special Resolution of the Company • The Registrar shall appoint one or more competent inspectors to investigate the affairs of a company and to report thereon to the Registrar in such manner as the Registrar shall direct if the company by special resolution declares that its affairs ought to be investigated by an inspector appointed by the Registrar. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 46

4. Bank’s Duty of care – Donoghue v Stevenson [1932] AC 562 • The banks duty to exercise reasonable care and skill is an objective one. • Accordingly the standard of reasonable care and skill is the one that a reasonable person may expect from banks, generally, under the circumstances of the case. • This may vary from case to case. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 47

• The duty to detect and report forgery of the customer’s signature on cheques drawn on the customer’s account; • The duty to exercise due care and skill when giving advice to the customer (Woods v Martins Bank Ltd. [1958] 1 QBD 55); • Banks and undue influence: • There is no presumption of undue influence • Therefore the circumstances of each case will determine if a bank has unduly influenced a customer. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 48

RIGHTS OF A BANK • Right to use the customers deposit as it pleases • The right to charge for (other) services rendered • Lien over a customer's securities • General right to indemnity • Right to terminate banking contract Case: Joachimson v. Swiss Bank 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 49

DUTIES OF A CUSTOMER • To make demand for his money (Joachimson v. Swiss Bank) • To exercise reasonable care in drawing cheques (London Joint Stock Bank v. Mac. Millan) • Disclose to the bank any fraud committed on his account • To draw cheques only on the availability of funds (Dud cheques; COP v Danquah, 1961, section 313 (A) of Act 29) … 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 50

Section 313 (A) , Act 29 • “A person who … issues any cheque in respect of any account with any bank when he has no reasonable ground (proof of which shall be on him) to believe that there are funds or adequate funds in the account to pay the amount specified on the cheque within the normal course of banking business … shall be guilty of an offence and liable on first offence to a fine not exceeding ¢ 5 million or twelve months imprisonment or both and in the case of any subsequent offence to a fine not exceeding ¢ 20 million or to a term of imprisonment not exceeding five years. ” • See COP v Danquah (1961) 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 51

LONDON JOINT STOCK BANK LIMITED V. MACMILLAN AND ARTHUR (1918) • Facts: a partnership M and A were customers of a bank. A clerk in the employment of the firms submitted to one of the partners for signature a cheque payable to the firm or bearer made out of 2 pounds in figures, but without any amount in words. After the partner has signed the cheque, the clerk altered the figures by inserting 1 and 0 before and after the 2 to make the amount 120 pounds and he wrote in the same amount in words. He obtained 120 pounds in cash on presenting the cheque to the bank. M and A contended that in signing the cheque the partner had authorised a payment of 2 pounds and only that sum should be debited to the account. • It was held that a customer owes a bank a duty of reasonable care in drawing cheques to prevent the bank being misled by a cheque altered after it had been signed. The customer is liable to the bank for any loss resulting from a breach of that duty. The bank was entitled to debit actual payment of 120 pounds to the firms. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 52

RIGHTS OF A CUSTOMER • To deposit funds • To be paid interest where applicable • To make withdrawals • Right to have accounts information kept in confidence • Rights to receive information on accounts 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 53

QUESTION • Are banks right to set daily withdrawal limit giving the customer’s right to withdrawal as indicated earlier? 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 54

See Foley and Hill • Unimaginable as it may seem, this unpalatable commercial practice seem perpetuated by customer's ignorance of their implied rights under the banker-customer contract. A case in point is the policy of daily withdrawal limit set for various customer segments, used evidently as a tool for liquidity management. Prudently as that may seem from a liquidity risk management perspective, it opens up new dimensions of operational risk from a legal perspective. Foley v Hill presents a sound legal basis for customers to challenge such operational policies that constraints a creditor from receiving full access to his funds on demand, in a prescribed manner as agreed, to the full extent of his credit. Unquestionably, increased access to this knowledge of basic legal rights by a broad range of financial service customers, would challenge inefficiencies in the supply chain and promote responsible competition. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 55

TERMINATION OF THE BANKING CONTRACT • Expiration • Mutual Agreement • Death • Insanity • Other: • Liquidation • Etc. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 56

Note • That there is a difference between bank-customer relationship and bank-customer contract. • The former may never end even if the latter ends. • The grounds stated above apply to a bank-customer contract ONLY. 11/25/2020 SLIDE PREPARE BY DEBORAH ADU-TWUMWAAH, UPSA, BANKING & FINANCE DEPT 57