3PLR – M.S. AWOLESI V. NATIONAL BANK OF NIGERIA LIMITED
POLICY, PRACTICE AND PUBLISHING, 3PLR, LAW REPORTS
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M.S. AWOLESI
V.
NATIONAL BANK OF NIGERIA LIMITED
FEDERAL SUPREME COURT
30TH MARCH, 1962
APPEAL NO. F.S.C. 146/1961
3PLR/1962/86 (FSC)
OTHER CITATIONS
BEFORE THEIR LORDSHIPS
UNSWORTH, FJ
TAYLOR, FJ
BAIRAMIAN, F.J.J.,
REPRESENTATION
Moore, Q.C. (with him Thompson) for the Appellant.
Odesanya (with him Olakunsin) for the Respondent. ;
MAIN ISSUES
DEBTOR AND CREDITOR – Guarantee and Indemnity-Discharge of Surety-Departure of Creditor from guaranteed Contract without consent of Surety-Substantive Departure.
BANKING AND FINANCE – Banking-Guarantee of Customer’s overdraft on current account- Guaranteed Account insulated by Bank-Unsecured Account opened for Customer without Surety’s consent-Discharge of Surety.
TAYLOR, F.J.,:- The facts of this case have been sufficiently and clearly set out in the judgments which will be delivered by my Lords Unsworth, and Bairamian, F.J.J. The authorities to which our attention was drawn at the hearing of the appeal have also been fully dealt with in those judgments and suffice it here for me to direct my attention to what I consider the major issue in this appeal, which I may state shortly as follows:-“Is the opening of account No.2 by the respondent bank in favour of the principal debtor, a substantial breach of the agreement of guarantee, exhibit “C”, entered into between the appellant and the respondent bank? ‘
This agreement was entered into on the 30th December, 1955 and at that time the indebtedness of the principal debtor to the respondent bank was £6,766-16s-9d as deposed to by the Manager of the respondent bank. Clause 1 of the agreement provides inter alia as follows:-
“In consideration of the Bank (which expression shall include their successors and assigns) continuing the existing account with Emanuel Olasemi Adeyemi Taiwo of 140, Akarigbo Street, Shagamu (hereinafter called the Principal), for so long hereafter as the Bank may think fit……
Now on the 31st December, 1955, again on the evidence of the manager of the respondent Bank, this Shagamu account of the principal debtor stood at £10,096; and in the month of January 1956 a second account was opened by the principal debtor. On the evidence of this witness quite substantial sums were paid into this account and there was little effort made to reduce the indebtedness on the old account. This is what the witness says:-
“Approximately £29,000 was paid into this account in year 1956. from 1st January, 1957 to 31st March, 1957 approximately £4,00 was paid in.” “Defendant opened No.2 account on 12th January, 1956 with deposit of £354. On 21st August, 1957 No.2 account was £2-17s-5d in credit. Up to 31st December, 1956 he paid £14,000 odd into No.2 account.
It should be borne in mind that the opening and operation of this account was done without the knowledge of the appellant who was kept completely in the dark as to what was going on between the respondent bank and the principal debtor. The word “continuing the existing account” in Clause 1 seem to me incapable of any other construction than that the parties had agreed that the account of the principal debtor existing on the 30th December, 1955 shall be continued as such, i.e. in an unbroken state, and that to my mind negatives the opening of a second account in the circumstances disclosed above. .
Clause 1 however, goes on to provide that:-
” or otherwise giving credit or accommodation or granting time to the Principal, I the undersigned, Moses Sowemimo Awolesi, Afin Akarigbo, Shagamu, hereby guarantee, ”
The respondent bank cannot in my view find shelter under this provision for the opening of the second account is not a giving of credit or accommodation or granting of time in respect of the existing account.
When one goes further and looks at the other clauses in the agreement, one finds that the words “ultimate balance” in clause 3, and “account” in clause 6 can only be read in the light of clause 1 as relating to “the existing account”. If the parties intended that the principal debtor should be placed in a position where he could open more than one account, and the guarantee should cover such accounts, then in my’ judgment they should say so in clear and unambiguous words, for it has been said that the law favours a surety and protects him with considerable vigilance and jealousy. In the case of Ward v. National Bank of New Zealand. (1882-3), 8 A.C. 755 at 764, Lord Justice Cotton’s observations in Holme v. Brunskill, 3 Q.B.D. 495 are contained in the judgment of their Lordships delivered by Sir Robert P. Collier, which reads thus:-
“The true rule, in my opinion, is that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that, if he has not consented to the alteration, although in cases where it is without inquiry evident that the alteration is unsubstantial, and one which cannot be prejudicial to the surety, the surety may not be discharged; yet that, if it is not self evident that the alteration is unsubstantial, or one that cannot be prejudicial to the surety, the Court will not in an action against the surety, go into the effect of the alteration.”
A little earlier their Lordship said at page 763 that:- ,
“A long series of cases has decided that a surety is discharged by the creditor dealing with the principal or with a co-surety in a manner at variance with the contract, the performance of which the surety had guaranteed.”
Is the variation that has taken place a substantial one? This must always depend on the peculiar circumstances of each case. In the case before us the position is this, that by the terms of the contract the surety would be entitled to the benefit of all sums paid in by the principal debtor into his account and which would undoubtedly go towards the partial liquidation of the principal sum and reduction of the interest payable on same. On the evidence before the trial Judge it was made clear that this second account was in credit at times to the tune of £2,500. In my view without an enquiry by way of ordering the taking of a proper account it is not self evident that the effect of the alteration is unsubstantial or one that cannot be prejudicial to the surety, nor is it an alteration that I can say is patently unsubstantial and not prejudicial to the surety. For these reasons I do not consider it necessary to embark upon an enquiry by way of accounts or other-wise into the effect of this alteration. I would discharge the surety from liability and would allow this appeal and dismiss the claim with costs assessed at 50 guineas in favour of the appellant in this Court. The costs of the Court below to be taxed by the Court.
BAIRAMIAN, F.J.,:- This is an appeal from the judgment of Irwin, J:, given on the 21st August, 1959, in suit AB/lll/57 of the High Court of the Western Region, in which the Bank sued two defendants-the 1st, E.O. Adeyemi Taiwo, their customer, and the 2nd, his guarantor, who is the appellant-on the claim for £10,023-14s-3d, to which these particulars were appended-“24th July, 1957 To balance of banking account £10,023-14s- 3d.” The appeal raises the question of the opening of a second account after a guarantee is obtained.
Taiwo, who had an account at the Shagamu branch of the bank, issued a number of cheques which could not be met; on the 30th December, 1955, the appellant signed a guarantee and they were honoured; on the 31 st the account, according to the Bank’s statement, was overdrawn to a little less than £10,100. The limit of the guarantee was £10,500 (plus charges). The Bank then insulated that account as the guaranteed account. Taiwo drew no more on it; but there are credits to it from time to time; and it is debited with interest from month to month. The overdraft in July 1957 stood, according to the Bank’s statement, at the figure sued for, £10,023-14s-3d. Taiwo submitted to judgment in the suit; his guarantor resisted the claim. The Bank attached to the Statement of Claim a copy of that account, and did not disclose the fact that in January 1956, a second account was opened for Taiwo at the Shagamu branch. It appeared in the Ledger Book brought by the manager when testifying for the claim; it showed that between January 1956, and July 1957, Taiwo had paid in £33,000 or more, and drew out of it not quite so much. Part of the argument for the guarantor was that, the second account notwithstanding, the Bank was obliged, under the rule in Clayton’s Case, to credit payments-in to the overdraft, and that prior debts should be satisfied in order of date; for the Bank it was argued that the rule did not apply in the case. The learned Judge held that:- “It was not open to the Bank to make a new account during the currency of the guaranteed one so as to prevent the application of the principle of Clayton’s Case, Devaynes v. Noble, (1816), 1 Mer. 572. “In Re Sherry, London and County Banking Co. v. Terry, (1884), 25 Ch. D. 692, Cotton L.J., said:
“The balance which the surety guarantees is the general balance of the customer’s account, and to ascertain that, all accounts existing between the customer and the bank at the time when the guarantee comes to an end, must be taken into consideration. So that it would be impossible for the bank to said, to the prejudice of the surety, “We carry these sums which have been paid by the customer not to an account of which we ascertain the balance, but to a new account, and we refuse to bring those sums to the credit of his banking account to the relief of the surety.” That is quite a different thing, and would be an improper dealing, improper in this sense, that it would prevent the balance of the account from being ascertained in accordance with the terms of the guarantee.’
“And in Mutton v. Peat, (1900) 2 Ch. 79, it was held that two accounts of the customer must be treated as one in order not to prejudice the rights of the surety.”
Lower down the learned judge says that:-
“The ultimate balance owing under Clause 3 of the guarantee is, I think, in the circumstances, to be ascertained by combining the two accounts at Shagamu with the account at Lagos and by taking the balance due on the 24th July, 1957, after treating all three as one unbroken account.”
He appointed a referee, who later gave this evidence:-
“From Exh. F the ledger marked 66 I have extracted the total of the debit and treated amounts applied to a No.1 account in name of E.O.A. Taiwo from the start of business on 30-12-55 of close of business on 24-7-57. From the same ledger I have extracted the totals of the debits and debt and credits applied to a No.2 account in name of E.O.A. Taiwo from 12-1-56 to 24-7-57. From the ledger Exh. marked 235 I have entered in my reckoning the credit balance of 5s- 2d as at 24-7-57.
“Had these three accounts been operated as one account from Dec. 30, 1955, to July 24 1957, the total indebtedness to the bank concerned would have been debit £9,610-14s-4d. I have prepared a statement of credit and debit transactions of E.O.A. Taiwo over the relevant period which I have signed and now produce, Exh. K.”
Judgment was given against the guarantor for £9,6190-14s-4d jointly and severally with Taiwo; as against Taiwo only, judgment had been given for £10,023-14s-3d before the trial began. Taiwo did not appeal; his guarantor did.
Of the grounds of appeal in the notice prepared by his solicitors, Nos. 3,4,5,8 and 9 were not argued. Nos 1,2,6, and 7 objected that the trial judge had not applied the rule in Clayton’s Case correctly, and that under it he should have dismissed the action; also that he erred in the way he decided that the ultimate balance was to be ascertained, and failed to consider the effect of absence of evidence of appropriation in the Bank’s case. Chief O. Moore, Q.C., advised the addition of this ground:-
“The respondent having materially altered the Condition of the guarantee by opening a second account for the 1st defendant and the learned Judge having so found erred in law in failing to dismiss the plaintiffs/respondents’ claim against the appellant.”
He argued the appeal under two submissions:-
(1) that the opening of the No.2 account materially altered the condition of the guarantee, and the surety was thereby discharged; alternatively,
(2) that as the principal debtor, after the guarantee was given, paid in more than the amount guaranteed, the guaranteed debt was satisfied. The second submission is based on the rule Clayton’s Case, the first on the ground that a contract of guarantee is strictissimi juris. Learned counsel for the Bank argued that the said rule did not apply in this case, and that the Bank was at liberty, under the terms of the guarantee, to open a second account, and the opening of it did not discharge the guarantor. The guarantee is an exhibit. Clause 1 states the consideration and gives the guarantee; Clause 2 limits it to £10,500 plus charges; Clause 3 states this:-
“3. And further, that this guarantee shall be applicable to the ultimate balance that may become due to the Bank from the Principal”;
Clause 4 states that it is a continuing guarantee, and endures until the expiry of six months after notice to determine it; Clause 5 deals with the manner in which the Bank may make and prove a demand in writing;
Clause 6 deals with proof of the amount due: it provides that:- “6. I agree that a copy of the account of the principal contained in the Bank’s books of account, or of the account for the preceding six months if the account shall have extended beyond that period, signed by the Manager or any officer for the time being of the Bank, shall be conclusive evidence against me of the amount for the time being due to the Bank from the principal in any action or other proceedings brought against me or my legal representatives upon this guarantee.”;
Clause 7 makes any admission in writing by the principal of the amount due, or any judgment against him, binding and conclusive; and Clause 8 waives any rights so far as may be necessary to give effect to the guarantee. Clause 1 is vital in this dispute; it states that:-
“In consideration of the Bank (which expression shall include their successors and assigns) continuing the existing account with Emanual Olasemi Adeyemi Taiwo of 140 Akarigbo Street, Shagamu (hereinafter called the Principal), for so long hereafter as the Bank may think fit, or otherwise giving credit or accommodation or granting time to the Principal, I the undersigned, Moses Sowemimo Awolesi, Afin Akarigbo, Shagamu, hereby guarantee, on demand in writing being made to me, the due payment of all advances, liabilities, bills, and promissory notes, whether made, incurred or discounted before or after the date hereof, to or for the Principal, either alone or jointly with any other person or persons together with interest, commission and other banking charges, including legal charges and expenses.”
When the guarantee was given, the existing account was a current account, but it was not continued as such: it was insulated as the guaranteed account at the end of the following day. A new account was opened as the customer’s current account, but it cannot be said to come within the words in Clause 1:-
“or otherwise giving credit or accommodation or granting time” to Taiwo: for the credit or accommodation or time was given and through the insulated account. The new current account was an unauthorised departure from the terms of the guarantee. In Halsbury’s Laws (3rd Ed.) Vol. 18, at p. 506, para. 929, on Guarantee and Indemnity, it is said that:-
“Any departure by the creditor from his contract with the surety without the surety’s consent, whether it be from the express terms of the guarantee itself or from the embodied terms of the principal contract, which is not obviously and without inquiry quite unsubstantial, will discharge the surety from liability, whether it injures him or not, for it constitutes an alteration in the surety’s obligations”. Holme v. Brunskill, (1878), 3 Q.B.D., 495, C.A., at pp. 505, 506, per Cotton, L.J., and other cases are cited in support. In Halsbury’s Laws, Vol. 2, in the chapter on Banking, at p. 172, in para. 321, on “Appropriation when account guaranteed”, it is said that “the banker is bound, however, to deal with the accounts in the ordinary ways of business”; and a little lower it is said that:-
“On the termination of the guarantee the account may be closed, and a new one opened, to which all payments in may be carried. But the banker is not entitled, where an account is guaranteed to a limited extent, to split that account during the continuance of the guarantee and attribute all payments in to the unsecured balance”.
The authorities are Re Sherry (supra), and Deeley v. Lloyd’s Bank Ltd., (1912) A.C. 756, H.L. Again, at p. 236, in para. 446, it is said that:- “It would be contrary to ordinary business and good faith to open a new account during the currency of the guaranteed one, and carry all payments in to the new account”.
The authority is Re Sherry, for what Cotton, L.J. said; and one is asked to compare Mutton v. Peat, and Bradford Old Bank, Ltd. v. Sutcliffe, (1918) 2 K.B. 833, C.A.
What the Bank did here was grave. As it is contrary to practice and good faith, presumably it has not been done, so there is no direct authority on the effect of opening a new account. The remarks which Cotton, L.J., made in Re Sherry were provoked by a question put by counsel in argument, namely this, at p. 700 of the report:-
“Could the bank have split up the account into two carrying the credit items to the non-guaranteed account?”
Whereupon Lord Selborne, L.C., said this:-
“You are suggesting a fraudulent device to prejudice the surety”.
Counsel repeated the question later; Lord Selborne said:-
“It appears to me that merely splitting the account in that way in the father’s lifetime would have no effect.”
What the latter remark means I do not quite understand: I can only surmise, from what Lord Selborne said, towards the bottom of p. 703, that as a guarantor is not to be prejudiced by any dealings without his consent between the creditor and the debtor, he ought not to suffer from their splitting the account. That it is a device to prejudice him is clear from the present case.
When the account is insulated, the guarantor can be kept in the dark. If he asks the debtor for his pass-book or statement of account, he can show the guarantor that which relates to the insulated account. If the Bank makes a demand, the Bank can give him a copy of the insulated account; and under Clause 6 of the guarantee the copy of the account which the Bank gives him is conclusive evidence of what the customer owes in court proceedings. That of course contemplates that the Bank has been keeping the account in accordance with practice and good faith-not a case such as the present in which the account is split, and the Bank makes a demand with the insulated account alone, leaving the other one undisclosed, with the result that the amount shown as the indebtedness of the customer is not, as Clause 6 expects it to be, “the amount for the time being due”.
There is another aspect; it relates to the effect that splitting the account can have on the amount of interest.
The referee said that if the accounts had been operated as one, the final debt would have been the amount he gave. The first portion of his evidence, and the accounts he put in, show that he treated them as separate accounts. His first sheet takes the No.2 account alone, and gives the debits and credits of it left and right, and arrives at their respective totals; his second sheet takes the No.1 account alone, and does likewise; and his third sheet merely combines the two (and also adds on the credit side 5s-2d as the balance of the Lagos account, which may be ignored). That is how the ultimate debt is arrived at; it is treating the Shagamu accounts as two legitimately separate accounts.
Chief Moore has pointed out that insulating the first account meant accumulating interest on it. He has referred to the portion of the judgment which states that at times the second account was in credit for sums exceeding £2,500. It seems to me that if the first account had been run on as an unbroken account into which all amounts paid in or drawn out of the unsecured second account were entered, the debit balances on which interest would be reckoned were bound to be different from those appearing in the insulated account.
For the Bank it has been argued that it was convenient to have a new account; that the guarantor was interested in the ultimate balance only, which could be struck on two (or three) accounts.
There are cases in which the mere adjusting of one account with another will be enough. It was done in Mutton v. Peat. There, a firm of stockbrokers had two accounts – a current account and a loan account- and the question was whether some bonds they had deposited to secure their general indebtedness, or merely what they owed on the loan account. When the firm defaulted on the Stock Exchange, the bank closed the current account and carried its credit balance of £ 1,362-1 Os-Od to a bankruptcy account, instead of setting it against the £7,500 due on the loan account. The Court of Appeal held that the deposit had been made to secure their general indebtedness – which meant that the bonds were security for £7,500 less £ 1,362-1 Os-Od; and that was what the owners of the bonds wanted to be done. There was no question of there being anything wrong with the firm’s having two accounts, so far that was concerned.
It has been pointed out for the Bank here that the referee was not examined on behalf of the guarantor. That was unfortunate. His counsel did not appear; when he court offered copies of the referee’s accounts, the gentleman who appeared for him said he had no instructions and asked leave to withdraw. It would have been better if the accounts had been sent to both sides earlier, so that counsel on either side could have examined them and been ready. As it is, one cannot go into details of the accounts, but must confine oneself to saying that the referee did not blend the two Shagamu accounts into one unbroken account, but merely stood them together.
I am sorry that I cannot accept the suggestion that the opening of the second account was done merely for convenience’s sake and was immaterial. Where the convenience lies of having two accounts instead of one, is hard to see. In any case, it is contrary to practice and frowned upon, and one can see why.
I do not think that the remedy is to order a fresh reference: for there is the added ground of appeal, that the Bank materially altered the condition of the guarantee by opening the second account, and that discharged the guarantor; which In my view succeeds on the ground that the opening of the second account was an authorised departure from the terms of the guarantee, which (in the words quoted from Halsbury’s Vol. 18) “is not obviously and without inquiry quite material.” On the contrary, the present case shows how that may work to the prejudice of the guarantor. (It becomes unnecessary on that view to consider the other submission on the rule in Clayton’s Case.)
After arriving at that view, I found a precedent for a Guarantee for Advances to a Customer, at p. 419 in Vol. 2 of the Encyclopaedia of Forms and Precedents (other than Court Forms), (3rd Edition): it is not identical, but it looks not unlike the one in the present case. It has, at p. 421, a special paragraph, which begins thus:-
“In the event of this guarantee ceasing from any cause whatsoever to be binding as a continuing security on me or my legal representatives the bank shall be at liberty without thereby affecting their rights hereunder to open a fresh account or accounts etc. etc.” with provisions on appropriation; which strikes me as being derived from re Sherry. The point to note is that the liberty to open a new account does not come into being until after the guarantee ceases to be binding as a continuing security on the guarantor or his estate.
I would allow the appeal and dismiss the claim against the appellant, with costs of appeal assessed at fifty guineas in all, and with costs below to be taxed there.
UNSWORTH, F.J.. (dissenting):- This is an appeal from a decision of Irwin, J., in which he held the appellant liable on a guarantee in the sum of £9,610-14s-0d. The facts are that the end of December, 1955 the current account at the respondent Bank of one Taiwo was overdrawn and cheques of the value of over £8,724 had been dishonoured. On the 30th December the appellant, who is Taiwo’s uncle, signed a guarantee and the first four paragraphs of that guarantee reads as follows:-
“In consideration of the Bank (which expression shall include their successors and assigns) continuing the existing account with Emanuel Olaseni Adeyemi Taiwo of 140 Akarigbo Street, Shagamu (hereinafter called the Principal), for so long hereafter as the Bank may think fit, or otherwise giving credit or accommodation or granting time to the Principal, I, the undersigned, Moses Sowemimo Awolesi, Afin Akarigbo, Shagamu hereby guarantee, on demand in writing being made to me the due payment of all advances, overdrafts, liabilities, bills and promissory notes, whether made, incurred or discounted before or after the date hereof, to or for the Principal, either alone or jointly with any other person or persons together with interest, commission and other banking charges, including legal charges and expenses.
“2. It is mutually agreed that the total amount recoverable hereon shall not exceed Ten thousand and five hundred pounds in addition to such further sum for interest thereon and other banking charges in respect thereof, and for costs and expenses as shall accrue due to the Bank within six months before or at any time after the date of demand by the Bank upon me for payment.
“3. And further, that this guarantee shall be applicable to the ultimate balance that may become due to the Bank from the Principal.
“4. I agree that this guarantee shall be a counting (continuing?) security to the Bank ” On the day on which the guarantee was signed and the subsequent day cheques which had previously been dishonoured were accepted. The amount of the overdraft was then accepted. The amount of the overdraft was then £10,096-16s-9d.
On the 12th January, 1956, a new account was opened by the Bank in the name of Taiwo. No cheques were drawn on the old account after the 31st December, 1955, and the amounts paid in did not represent a serious attempt to reduce the overdraft and interest thereon The No.2 account was at one time in credit for sums of about £2,500 but in May 1957 the credit balance in that account was £2019 sO 4d. On the 21st May, 1956, the Bank demanded collateral security, and, when this was not forthcoming, proceeded to enforce the guarantee and later sued the principal debtor and the guarantor in these proceedings for the sum of £10,023-l4s-3d due under the old account.
The trial Judge held that the liability of the guarantor under Clause 3 of the guarantee was for the ultimate balance and said that this should be ascertained by treating all the appellant’s accounts with the Bank as one unbroken account. He accordingly gave judgment in the following terms:-
“The ultimate balance owing under clause 3 of the guarantee is, I think, in the circumstances, to be ascertained by combining the two accounts at Shagamu with the account at Lagos and by taking the balance due on the 24th July, 1957, after treating all three as one unbroken account. “Judgment will be entered for the plaintiff Bank against the second defendant for the ultimate balance thus ascertained. “For this purpose it will be necessary to refer the matter to a suitable referee to be appointed by the Court in default of agreement ii( by the parties.”
The parties agreed that the referee should be the Manager of the Bank of West Africa at Abeokuta. The referee calculated the liability as £9,610- l4s-4d. The method of calculation adopted by the referee was not disputed in the court below, and judgment was accordingly given for this amount. It has been submitted in this appeal that the Judge should have held that the very fact of opening a second account discharged the guarantor from all liability.
I have considered the cases referred to by Counsel, and, in particular, the judgment of Lord Selborne and Cotton, L.J., in re Sherry, London and County Banking Company v. Terry, (1884), 25 Ch. D. 692. I do not construe these judgments as meaning that a surety is necessarily discharged by the opening of a new account, but only that the opening of such an account would not affect the surety whose liability must be calculated in terms of the guarantee. The matter is put in this way in Paget’s Law of Banking, 5th Edition, at p. 441:-
“Where there is a mere unbroken current account, part of which is covered by a guarantee, the other not, as where the guarantee has been determined, there is, in the absence of appropriation, no presumption that moneys paid in are to be allocated to the unsecured rather than the secured portion, or otherwise than in the usual sequence of payments in and out in order of date. “Where the guarantee is a continuing one to secure an ultimate balance, the question of appropriation does not arise, except in the sense suggested by COTTON, L.J., in re Sherry, London and County Banking Co. v. Terry, namely, that credits could not be carried to a new account during the currency of the guarantee so as to deprive the surety of the benefit of them in estimating the ultimate balance for which he was liable.”
Now, what were the terms of the guarantee in the present case? Clause 1 provides that the consideration is: “continuing the existing account for so long hereafter as the Bank may think fit, or otherwise giving credit or accommodation or granting time to the Principal.” Clause 2 says that the guarantee shall be applicable to the ultimate balance, and Clause 3 makes the guarantee a continuing one. This guarantee does not expressly prohibit the opening of a further account, and indeed the terms of the guarantee appear to contemplate that the old account may be closed and a further account or accounts opened. It is, however, a guarantee for the ultimate balance, and I construe this as meaning the ultimate balance on all accounts. In these circumstances, I would hold that the guarantor was not discharged from liability but that the Bank was obliged to give the guarantor the benefit of credits in other accounts. As was said in Mutton v. Peat (1900) 2 Ch. 79, the method of book-keeping adopted by the Bank must not prejudice the real rights of the surety under the guarantee, and the Judge in the present case rightly held that the amount due by the guarantor was the ultimate balance as ascertained after treating all accounts as one unbroken account.
Counsel for the appellant further submitted that amounts exceeding the balance due on the old account at the time of the guarantee had been paid into the No.2 account and that on this ground there was no liability. I do not think that there is substance in this point. The guarantee was a continuing guarantee for the ultimate balance. For the reasons given in this judgment I would dismiss the appeal. Appeal allowed: Judgment against the guarantor set aside.
Word v National Bank of New Zealand (1882) 8 AC 755
Holme v. Brunskill, (1878), 3 Q.B.D. 495; 47 L.J.Q.B. 610; 38 L.T. 838; 42 J.P 757.
Clayton’s Case: Devaynes v. Noble, (1816) 1 Mer. 529; 8 L.J. Ch. 256; 35 E.R. 767, 781.
In re Sherry: London and County Banking Co., v. Terry, (1884), 25 Ch.D. 692; 53 L. T. Ch. 404; 50 L. T. 227; 32 W.R. 394.
Mutton v. Peat, (1900) 2 Ch. 79; 69 L.J. Ch. 484; 82 L.T. 440; 44 Sol. Jo. 427; 48 W.R. 486.
Deeley v. Lloyd’s Bank Ltd., (1912) A.C. 756; 81 L.J. Ch. 697; 107 L. T. 465; 29 T.L.R. 1; 56 Sol. Jo. 734.
Bradford Old Bank Ltd., v. Sutcliffe, (1918) 2 K.b. 833; 88 L.J.K.B. 85; 119 L.T. 727; 34 T.L.R. 619; 62 Sol. Jo. 753.
