D

Privy Council

Morrell and another v Workers Savings and Loan Bank

[2007] UKPC 3
E

2006 Oct 17, 18, 19; 2007 Jan 18

Lord Nicholls of Birkenhead, Lord Hope of Craighead, Lord Millett, Lord Walker of Gestingthorpe and Lord Mance

Banking Bankers authority Customers instructions Contract providing for bank to honour written instructions signed by customer or agent Bank paying out from account on basis of customers oral instructions Whether bank entitled to be indemnied by customer In 1992 the appellants, Mr Giord Morrell and Miss Fiona Morrell, opened four accounts with the respondent bank in Jamaica. They signed account opening forms which provided that

Each of the undersigned further agrees with you and with each other that . . . such moneys and interest or any part thereof may be withdrawn by any one of the undersigned or his or her attorney or agent, and each of the undersigned hereby irrevocably authorises you to accept, from time to time, as a sucient acquittance for any amount so withdrawn, any receipt, cheque or other document signed by any one of the undersigned, or his or her attorney or agent, without any further signature or consent. The rst appellant used the accounts (a Jamaican dollar current account, and US dollar, Canadian dollar and pound sterling accounts) in order to facilitate his dealings in foreign exchange. The accounts were frequently overdrawn and in May 1994, after the level of overdraft climbed steeply, the bank refused to honour further cheques and the account became inoperative. In proceedings brought in March 1996 the appellants claimed inter alia an account and declarations to the eect that the

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Morrell v Workers Savings and Loans Bank (PC)

[2007] Bus LR Digest

A

bank had wrongly debited their accounts in all instances where the bank was unable to supply documentary proof of authorisation for such debits. In a judgment given on 2 October 1998, Cooke J found that the bank had made and received oral authorisation to make the disbursements to which the debits under challenge purported to relate. On this and other grounds he dismissed the appellants claim and allowed the banks counterclaim for the amount of the outstanding overdraft and interest. The judges decision was upheld by the Court of Appeal of Jamaica (Bingham and Walker JJA; Downer P dissenting) on 4 November 2004. On their appeal to the Judicial Committee of the Privy Council, the appellants rst submission was that, as a matter of contract, the bank disentitled itself from debiting any sums in respect of which it did not obtain one of the appellants signatures. The appeal on this and other grounds was dismissed. Hilary Phillips QC and Lloyd Barnett (both of the Jamaican Bar) (instructed by Saunders Solicitors LLP) for the appellants; Sandra Minott-Phillips and Dave Garcia (both of the Jamaican Bar) (instructed by Myers Fletcher & Gordon) for the bank. LORD MANCE, giving the judgment of the Board, said at para 10: 10 In support of the rst submission reliance is placed on the language of the documentation by which the accounts were opened, irrevocably authorising the bank to accept, from time to time, as a sucient acquittance for any amount so withdrawn, any receipt, cheque or other document signed by any one of the undersigned, or his or her attorney or agent, without any further signature or consent . . . as well as upon certain dicta, particularly in N Joachimson v Swiss Bank Corpn [1921] 3 KB 110, 127 where Atkin LJ said that a banks obligation includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch. But a customers irrevocable authority to a bank to accept a document signed by a particular undersigned, attorney or agent without any further signature or consent does not preclude the actual customer from giving or the bank from accepting and acting upon oral instructions from that customer. Similarly, the fact that a bank impliedly promises to repay any amount due against the written order from the customer addressed to the bank at the branch does not exclude either the possibility of an oral order or a banks right to be indemnied in respect of an oral order, if it can show that such was given by the customer or with his authority. A bank may not be bound, or prudent, to accept purely oral instructions. But there is no basis in the contractual documentation used in this case or at common law for saying that a bank which can show that it received and chose to act on oral instructions is disentitled from obtaining an indemnity from its customer. That would be both strange and unfair. Even if contractual documentation purported to preclude a bank from acting upon, or being indemnied for acting upon, a customers oral instructions, there would be little conceptual diculty about treating subsequent oral instructions given by the customer on which the bank acted as involving a consensual variation. Cooke J was on any view right to conclude that the bank was entitled to indemnity in respect of any orally authorised disbursements which it could establish, and the majority in the Court of Appeal was correct to uphold him on this point. PMM