Banking law

Liability on joint account - absence of signed mandate

The Royal Bank of Scotland PLC v Sandra Estelle Fielding [2003] EWHC 986 (Ch)

In this case, the bank sought and obtained judgment against Ms Fielding for 3.2 million.

Ms Fielding's liability to the bank arose under a joint account opened in the joint names of herself and her husband.

Ms Fielding claimed that she did not sign a bank mandate in connection with the joint account and that even if she did, its effect was not to make her liable for the sums claimed.

It was Ms Fielding's case that the debit balance on the joint account for which she was ultimately liable represented borrowings made by her husband that she had never authorised and of which she was ignorant.

It was held that even though no signed mandate had been produced the evidence, on the balance of probabilities, was that a mandate had been signed.

In reaching this finding account was taken, among other things, of the fact that the bank's usual procedure was to obtain a signed mandate.

Although clearly case specific, the finding illustrates the difficulty faced by any customer in seeking to establish that they did not sign a particular bank document which is routinely executed in the course of banking practice.

Among other arguments advanced, Ms Fielding contended that where the limit of an overdraft agreed between a bank and joint account holders was exceeded as a result of an express agreement between one account holder and the bank, the other account holder should not be liable for sums drawn in excess of the jointly agreed overdraft limit.

The judge rejected this argument.

A bank was authorised by mandate to grant an implied request for a loan made by one account holder drawing a cheque over and above an agreed overdraft facility and there were no reasons why the position should be different in the event of an express request.

In both cases both joint account holders are liable to repay any indebtedness to the bank.

Having so held the judge then considered the degree to which a mandate was sacrosanct.

As part of this consideration the judge left the law open for development when he stated that 'there could be a case in which the particular purpose of the matrimonial joint account as known to the bank, coupled with the purpose of a particular cheque and the circumstances in which knowledge of its purpose was brought home to the bank, would make it impossible for the bank to suppose that the wife's authority (as originally conferred by mandate) could continue to be relied upon'.

The judge also indicated that when an account was in overdraft a different analysis may be called for since unless the debt was plainly 'a normal advance to husband and wife for their joint benefit' the bank should be on inquiry as to the possibility of the wife's liability having been created in abuse of confidence.

The land has now been tilled and the seeds sown for an attack on the sanctity of the mandate in the case of the indebtedness of a wife under a joint matrimonial account.

By Simon Sugar, barrister, 36 Bedford Row, London