Commercial

Joint bank account - bank agreeing with claimant's husband to allow borrowings in excess of overdraft limit - both account holders liable for resulting overdraft

Royal Bank of Scotland plc v Fielding: ChD (Mr Justice Hart): 2 May 2003

The defendant and her husband signed a facility agreement allowing them a 200,000 overdraft on their joint account with the claimant bank.

The husband alone agreed with the bank to borrow over and above the limit agreed by the facility, until the amount of the overdraft reached 3.14 million.

After the husband had been declared bankrupt, the bank issued proceedings against the defendant for payment of the amount due on the joint account.

The bank alleged that, on opening the joint account, the defendant and her husband had signed a mandate declaring that both would be liable for any overdraft incurred on the account, but it was unable to produce that document in evidence.

Charles Purle QC and David Eaton Turner (instructed by Cripps Harries Hall, Tunbridge Wells) for the bank; Roger Kaye QC and Alexander Pelling (instructed by DJ Freeman) for the defendant.

Held, giving judgment for the bank, that joint bank account holders would be jointly and severally liable for any overdraft incurred on the account consequent on both 'tacit sole borrowing', where with no agreed overdraft facility one account holder drew a cheque without the authorisation of the other, as well as 'sole facility borrowing', where with an overdraft facility the bank agreed with only one of the holders to lend outside the limits of the joint facility without reference to the other; that all that the bank did in either case was to meet a cheque drawn according to a mandate, and, if the bank were authorised by the mandate to grant an implied request for a loan (tacit sole borrowing), meeting an express request (sole facility borrowing) would similarly be authorised; that, on balance of probabilities, a document in the form of a mandate had been signed by the defendant and her husband; and that, accordingly, unless there was something in the facility agreement itself which limited, expressly or impliedly, what would otherwise have been the effect of the mandate, the defendant was prima facie liable to the bank for all sums debited to the joint account on her husband's instructions.