Foley v Hill
Foley v Hill (1848) 2 HLC 28, 9 ER 1002 is a judicial decision of the
House of Lords in relation to the fundamental nature of a bank
account. Together with
Joachimson v Swiss Bank Corporation
Joachimson v Swiss Bank Corporation  3 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
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.
2.1 House of Lords
Edward Thomas Foley
Edward Thomas Foley and Sir Edward Scott (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 £6117 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 £6117 10s together with
interest calculated by the bank up to the 25th of December 1831, but
Foley filed a bill in equity 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
The defendant banks pleaded a defence based upon the Statute of
Lord Cottenham LC
The case came initially before the Vice-Chancellor, Sir James Wigram,
who ordered an account. That decision was appealed to the Lord
Chancellor, Lord Lyndhurst, 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 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
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
Lord Cottenham LC said the following.
Money, when paid into a bank, ceases altogether to be the money of the
principal; it is by then the money of the banker, who is bound to
return an equivalent by paying a similar sum to that deposited with
him when he is asked for it. The money paid into a banker’s is money
known by the principal to be placed there for the purpose of being
under the control of the banker; it is then the banker’s money; he
is known to deal with it as his own; he makes what profit of it he
can, which profit he retains to himself, paying back only the
principal, according to the custom of bankers in some places, or the
principal and a small rate of interest, according to the custom of
bankers in other places. The money placed in custody of a banker is,
to all intents and purposes, the money of the banker, to do with it as
he pleases; he is guilty of no breach of trust in employing it; he is
not answerable to the principal if he puts it into jeopardy, if he
engages in a hazardous speculation; he is not bound to keep it or deal
with it as the property of his principal; but he is, of course,
answerable for the amount, because he has contracted, having received
that money, to repay to the principal, when demanded, a sum equivalent
to that paid into his hands.
That has been the subject of discussion in various cases, and that has
been established to be the relative situation of banker and customer.
That being established to be the relative situations of banker and
customer, the banker is not an agent or factor, but he is a debtor.
Lord Brougham, Lord Campbell and Lord Lyndhurst gave concurring
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, this was the first time
that the House of Lords, as the highest court in the land, had
affirmed the position.
^ E.P. Ellinger; E. Lomnicka; C. Hare (2011). Ellinger's Modern
Banking Law (5th ed.). Oxford University Press. pp. 121–122.
^ Toby Baxendale (14 September 2010). "What is the Legal Relationship
Between the Banker and his Customer?". The Cobden Centre. Retrieved 5
Keech v Sandford
Keech v Sandford  EWHC Ch J76
^ a b c "
Foley v Hill
Foley v Hill (1848)". Entreprise United Settlement Limitée.
Retrieved 5 June 2016.
^ (1848) 2 HLC 28 at 36
^ See for example: Morris v Rayners Enterprises Inc  UKHL 44 (30
Roy Goode (2010). Commercial Law (4th ed.). Penguin. p. 579.
^ See for example: Parker v Marchant 1 Phillips 360; Potts v Glegg 16
Mees & W 321;
Devaynes v Noble
Devaynes v Noble (1816) 1 Mer 529. In 1832 Joseph
Story, Commentaries on the Law of Bailments, stated (at page 66):
"[i]n 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,