Foley v Hill (1848) 2 HLC 28, 9 ER 1002
Citation:Foley v Hill (1848) 2 HLC 28, 9 ER 1002 .
Rule of thumb:The nature of the banker and customer relationship is that the bank is not the custodian of the customer’s money, but there is a debtor and creditor relationship. The customer essentially loans the bank the money to do as they please with it, within reason.
Background facts:The facts of this case were that a customer argued that the bank was acting as the trustee for his money and that it had to remain in the bank at all times, with the bank not being allowed to loan it out at interest. The bank argued that it was merely a creditor and debtor relationship where they were free to lend it out at interest and make money from it.
Judgment:The Court held that it was a creditor and debtor relationship and that banks could legally loan out money to the public at interest – this was one of the seminal cases which defined modern banking and allowed modern bank to only keep a percentage of a customer’s money actually inside their account whilst loaning the rest out,
Ratio-decidendi:
“Money placed in the 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 the 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”. (commercial banking – nature of the relationship). Foley v Hill, 1848
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.