''Foley v Hill'' (1848) 2 HLC 28, 9 ER 1002 is a judicial decision of the
House of Lords
The House of Lords, also known as the House of Peers, is the Bicameralism, upper house of the Parliament of the United Kingdom. Membership is by Life peer, appointment, Hereditary peer, heredity or Lords Spiritual, official function. Like the ...
in relation to the fundamental nature of a bank account. Together with ''
Joachimson v Swiss Bank Corporation''
9213 KB 110 it forms part of the foundational cases relating to English banking law and the nature of a bank's relationship with its customer in relation to the account.
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. When the customer deposits money in the account it becomes the bank's money, and the bank's obligation to repay an equivalent sum (and any agreed interest) to the customer or the customer's order.
The decision was crucial to the modern evolution of banking. Had the appellant's argument that the bank should be treated as a
trustee
Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to t ...
succeeded then a bank would not be entitled to use the sums deposited with it for lending to other parties because of the
rule against trustee's making a profit out of the trust property.
Facts
Edward Thomas Foley
Edward Thomas Foley (21 December 1791 – 30 March 1846), of Stoke Edith, Herefordshire, was an English Tory (and later Conservative) politician.
He was the eldest son of Hon. Edward Foley and his wife Eliza Maria Foley Hodgetts and elder bro ...
and
Sir Edward Scott
''Sir'' is a formal honorific address in English for men, derived from Sire in the High Middle Ages. Both are derived from the old French "Sieur" (Lord), brought to England by the French-speaking Normans, and which now exist in French only as ...
(who was not a party to the action) were owners of
collieries in Staffordshire. They had jointly opened an account with the defendant bank. In April 1829 £6,117 10s was transferred from that joint account to a separate account in the sole name of Foley. The bank sent a letter enclosing the receipt and agreeing to pay 3 per cent interest on the sum. From 1829 until 1834, when the joint account was closed, Foley's share of the profits of the collieries was paid by cheques drawn on the joint account by the agents managing the collieries. These cheques were paid in cash or by bills drawn by them on their London bankers in favour of Foley, and none of them were paid into his separate account. The only amount ever credited to that account was the initial £6,117 10s together with interest calculated by the bank up to 25 December 1831, but not afterwards.
Foley filed a
bill in equity
Equity is a particular body of law that was developed in the English Court of Chancery. Its general purpose is to provide a remedy for situations where the law is not flexible enough for the usual court system to deliver a fair resolution to a cas ...
in January 1838 against the banking, claiming that
an account should be taken of not only the initial deposit but also all other sums received by the bank for Foley on his private account since April 1829, with interest on the same at the rate of 3 per cent per annum; and also an account of all sums properly paid by them for or to the use of Foley on his said account since that day.
The defendant banks pleaded a defence based upon the
Statute of Limitations
A statute of limitations, known in civil law systems as a prescriptive period, is a law passed by a legislative body to set the maximum time after an event within which legal proceedings may be initiated. ("Time for commencing proceedings") In m ...
.
Judgment
![Charles Pepys, 1st Earl of Cottenham by Charles Robert Leslie cropped](https://upload.wikimedia.org/wikipedia/commons/c/c5/Charles_Pepys%2C_1st_Earl_of_Cottenham_by_Charles_Robert_Leslie_cropped.jpg)
The case came initially before the Vice-Chancellor, Sir
James Wigram
Sir James Wigram, FRS (1793–1866) was an English barrister, politician and judge.
Life
He was the third son of Lady Eleanor and Sir Robert Wigram, 1st Baronet, and younger brother name of Sir Robert Fitzwygram, 2nd Baronet in 1832; another ...
, who ordered an account. That decision was appealed to the Lord Chancellor,
Lord Lyndhurst
John Singleton Copley, 1st Baron Lyndhurst, (21 May 1772 – 12 October 1863) was a British lawyer and politician. He was three times Lord High Chancellor of Great Britain.
Background and education
Lyndhurst was born in Boston, Massachusetts, t ...
, who reversed the decision. The matter was then appealed to the House of Lords where, unusually, Lord Lyndhurst sat on the appeal against his own decision (although by this time he had been replaced by
Lord Cottenham
Charles Christopher Pepys, 1st Earl of Cottenham, (; 29 April 178129 April 1851) was an English lawyer, judge and politician. He was twice Lord High Chancellor of Great Britain.
Background and education
Cottenham was born in London, the second ...
as Lord Chancellor). After hearing counsel for the appellant Foley, their Lordships told counsel for the bank that they did not need to address them and promptly dismissed the appeal.
House of Lords
The House of Lords held that because there was no equitable relationship the defence based upon limitation periods succeeded. Giving the main judgment, the
Lord Cottenham LC
Charles Christopher Pepys, 1st Earl of Cottenham, (; 29 April 178129 April 1851) was an English lawyer, judge and politician. He was twice Lord High Chancellor of Great Britain.
Background and education
Cottenham was born in London, the second ...
said the following.
Lord Brougham, Lord Campbell and Lord Lyndhurst gave concurring opinions.
Significance
The decision has been applied many times since, and has never been seriously questioned. Although various earlier cases had also applied the principle that the relationship between banker and customer was one of debtor and creditor,
[See for example: ''Parker v Marchant'' 1 Phillips 360; ''Potts v Glegg'' 16 Mees & W 321; '']Devaynes v Noble
''Devaynes v Noble'' (1816) 35 ER 781, best known for the claim contained in ''Clayton's case'', created a rule, or more precisely common law presumption, in relation to the distribution of money from a bank account. The rule is based upon the d ...
'' (1816) 1 Mer 529. In 1832 Joseph Story, ''Commentaries on the Law of Bailments'', stated (at page 66): " ordinary cases of deposits of money with banking corporations, or bankers, the transaction amounts to a mere loan or mutuum, and the bank is to restore, not the same money, but an equivalent sum, whenever it is demanded." this was the first time that the House of Lords, as the highest court in the land, had affirmed the position.
Notes
{{DEFAULTSORT:Foley v Hill
English banking case law
House of Lords cases
1848 in case law
1848 in British law