Bank Statement of Account
A statement of account is the record of all daily transactions of customer with a bank. It is an established practice in banking and therefore one of the implied terms of contract between a banker and the customer that the banker shall supply or provide his customers with statement that contain records of the customer’s transactions with the bank over certain intervals of time. In other words, by implication, a current account holder is entitled to a statement of his bank account with his/her banker while a savings account holder is also entitled to a record of his/her transactions (in any form) with his/her bank. Statements of accounts are sent to customers periodically. This allows the customer to examine in details, all the entries in the statement of account and to report any discrepancies to the bank. This is an obvious advantage of issuing bank statements to customers because it affords the customer the opportunity to compare his/her record with the bank’s record and through reconciliation; sort out the causes of the differences (if any).
It is a matter of banking practice and convenience that banks, in most cases provide current account customers with statements of accounts on monthly basis. However, this is not a golden rule as a customer may demand for his statement for intervals that are shorter (like daily, weekly or fortnightly), depending on the volume of transactions. Passbooks are usually issued to savings accounts holders. This system by which the customer holds a passbook which is handed to the bank to record transactions by hand as they occur is now becoming obsolete. Many banks now have computerised savings accounts on which they now issue computerised statement of account. For deposit accounts, statement of account may not be issued because deposit receipt is normally issued and interests are only payable at maturity. Periodic statements of accounts are however necessary for all classes of loan accounts.
The legal status of a bank statement of account regarding the reliance of the customer on it was expressed in Chatterton vs London and County Bank 1891 where it was held that a customer has no duty to his bank neither to examine his passbook or statement of account nor to draw its attention to errors. This position was confirmed in Tai Hing Cotton Mill Ltd. vs Liu Chong Hing Bank Ltd and Others 1986 where it was decided that a customer has no duty to inspect bank statements and that even by express terms, bank statements are not conclusive evidence. From the Tai’s case, it is clear that even where there is an express term that the bank statement shall be conclusive in the absence of objection by the customer, the customer is still said not to have accepted it.
It is the practice in banking that when the bank or its customer discovers an error; the necessary correction is often made without dispute. However, we can have more difficult situations that may be caused by: (a) wrong credit to a customer’s account (or failure to post debits); (b) wrong debit in the account of a customer (or failure to post credits); and (c) bank charges. The effect and implications of the occurrence of the above sources of disputes and disagreement on bank statement of account are now discussed below:
Over-crediting a Customer’s Account/Failure to Post Debit
When a sum has been wrongly credited to a customer’s account or a debit has been omitted, the statement will show a credit larger than it should (if not an overdraft account). In either of these cases, the error is likely to occur due to an error in dealing with the account of another customer, indicating that the entries have got into the wrong account.
There are many consequences for wrongful credit to a customer’s account. The customer may withdraw the money and disappear. Even if he does not disappear, it may be difficult for banks to reclaim such money from the customer. In the process of correcting the error, the bank may possibly incur damages when cheques are dishonoured and negligence could be established.
In law, there is a general right to recover money paid in error. In these circumstances of posting, it is a bookkeeping error and not a payment error. However, the right of the banker to reverse the entry and thereby reduce the credit balance to correct figure, by entry in its records and notify the customer is qualified in one respect. When a bank discovers the mistake of over crediting and the bank is convinced that the customer is yet to receive any information on his current balance in the account, the mistake can be corrected by simple internal entry. By sending a statement of account showing too large a credit balance to a customer, the bank may have, by implication induced the customer to believe that he had more in the account than he was really entitled to. If, in all honesty, the customer relied on the statement and altered his position accordingly, the bank is estopped from correcting its mistake by reducing the balance. However, if the customer is fully aware of the mistake and only wants to take advantage of the mistake committed by the bank, he will not succeed.
In Rhind vs Commercial Bank of Scotland 1860, it was held that a credit entry in the customer’s account is nothing more than primae-facie evidence against the bank. In this case, the bank posted an amount of £80 twice in the passbook of a customer who refused to allow the mistake to be corrected on the ground that the entries were final. He sued the bank but the case was thrown out because the customer was only trying to take undue advantage since he was fully aware of the error. In the case of Holt and Co. vs Markham 1923, where the account of a customer was credited with wrong gratuity entitlement for long, it was held that the conduct of the banker led the customer to believe that the money was his own and as he had altered his position by spending the money, it would therefore, amount to hardship to enforce the repayment of the money. Lloyds Bank Ltd. vs Brooks 1950 is another interesting case where the bank was estopped from asserting its claim to recover an accumulated amount of £1,108 credited into the account of a customer Miss Cecil Brooks. The court held that the bank had a duty to keep its customers correctly informed of the position of the account so as not to induce the withdrawal of money to which he was not entitled. However, the court held that for estoppel to succeed against the bank, it would be insufficient to prove that the customer had spent the money beyond recall. However, in Holland vs Manchester and Liverpool District Banking Co 1909, the decision was that the bank was entitled to have wrong debit ultimately adjusted with a proviso that such right is not absolute.
In United Overseas Bank vs Jiwani 1976, Jiwani was erroneously credited the second time with a sum of £11,000. The court, in this case, laid down three conditions that must be simultaneously met before the bank’s plea to reclaim wrong debit could fail. These conditions which must be shown by the customer are:
· that the bank has misrepresented the state of the account by error that emanated from it;
· that the error had misled the customer;
· that the customer, as a result of his being misled, altered his position in a way that in equity, he should have paid.
It should be added that for the bank’s bid to recover to fail, the customer must not be aware of the wrong balance and must have honestly altered his position. In British and North European Bank vs Zalstein 1927, a bank manager deliberately transferred £2,000 to the account of Zalstein who was permitted by the bank to exceed his agreed overdraft limit. This was done to conceal the size of the overdraft from the bank’s auditor. This entry was later on reversed so as to re-establish the correct position. Zalstein maintained that his debt had been settled with the wrong entry which he relied on. The court held that the bank has not misled Zalstein nor in consequence, has Zalstein relied on information given by the bank. The bank was not estopped from asserting the true position. Again, it will be difficult for a customer to prove that he was not aware of an error if the balance given to him by his banker is inconsistent with his earning. For instance, if a customer earns a monthly salary of N20,000 and with no other source of income , suddenly finds a credit balance of N75,000 in his account. Such customer cannot honestly say he thought the money was his own.
Over-debiting a Customer’s Account/ Failure to Post Credit
When a sum has been wrongly debited to a customer’s account or a credit has been omitted, the customer’s statement of account will show a credit balance lower than it should be (if not an overdraft account)
A customer‘s account may be wrongfully debited through payment of post-dated cheques; payment of cheques already countermanded; payment of cheques bearing forged signature; payment of cheques which have been materially altered; debiting to the account, an item which should properly be debited to some other accounts, and failing to credit payment received (on behalf of a customer) because it was wrongly credited to someone else’s account. In case of the last instance cited above, it may be possible to make amend by making a correction when the error is discovered and go on to check if any cheque has been erroneously returned and in this case, the bank should immediately make representations to the customer. The bank should tender its apology to the customer, and more importantly, to the payee of a cheque that was wrongfully dishonoured due to the mistake of over-debiting. The apology should indicate that the mistake was on the part of the bank and not of the customer; and that the cheque will be honoured if it is represented. In Baker vs Australia and New Zealand Bank (1958), the absence of apology by the bank was one of the factors considered in awarding damages against the bank. If a customer draws a cheque in reliance on the amount of correct balance and the cheque is dishonoured by the bank because the balance in the books of the bank as at the time of presentation is insufficient to meet the payment of such cheque, there are consequences. The consequence is more serious if the customer is a trader as he may recover from the bank, substantial damages for breach of contract causing detriment to his credit worthiness.
Usually, the bank cannot debit the payment of a forged cheque to a customer’s account. When such forgery is discovered, the debit must be reversed by a corresponding credit to the account. The only exception here is where the customer, on becoming aware of the forgery of his cheque, has withheld the information from the bank as delivered in Greenwood vs Martins Bank Ltd. (1933).
Conclusions
Afolabi (1990) analysed the legal effect of statement of account which according to him, is not clear. The practice in the United State of America (USA) is that when the bank sends statement of account to the customer, it will expect that the customer will go through it and report any discrepancy or suspicious entries without delay. Non receipt of any complaint from the customer by the bank indicates that the customer agrees with the entries and the interval of time after which such presumption could be made will depend on the size of the account. This stand, according to Afolabi (1990) had been given judicial blessing in the USA. However the stand of the British courts is stern against banks as stressed Chatterton’s case where it was held that the customer has no duty to examine the statement of account. It is therefore appropriate and necessary and appropriate for issues relating to customer’s statement of bank accounts to be considered on its own merit in Nigeria.
Important points that should be repeated here is that a current account holder is entitled to a statement of his bank account with his/her banker while a savings account holder is also entitled to a record of his/her transactions (in any form – passbook etc) with his/her bank and that these classes of account holder should neither be denied of this rights nor be charged for these except the request is for an extra statement of account apart from the mandatory one entitled to at the appropriate interval.
References
Adekanye, F. (1986), Practice of Banking Volume I. Lagos: F&A Publishers Limited.
Afolabi, L (1990), Law and Practice of Banking, Lagos: Top Golden Nigeria Limited.
BPP (1989), Practice of Banking I, London: BPP Publishing Limited.
Published in Ondo State Banker – Journal of the Chartered Institute of Bankers of Nigeria, Akure Branch. Vol 4 No1, September 2008 – ISSN 0794-6171
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