Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WINN,LORD JUSTICE BUCKLEY |
| Judgment Date | 29 July 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J0729-2 |
| Date | 29 July 1970 |
| Court | Court of Appeal (Civil Division) |
[1970] EWCA Civ J0729-2
In The Supreme Court of Judicature
Court of Appeal
Appeal by plaintiff from judgment of Mr. Justice Roskill on 5th November, 1969.
The Master of the Rolls (Lord Denning)
Lord Justice Winn and
Lord Justice Buckley
Mr. ALLAN HEYMAN, Q.C., and Mr. MICHAEL KENNEDY (instructed by Messrs. Landau & Co.) appeared on behalf of the Appellant Plaintiffs.
Mr. RICHARD YORKE and Mr, K.H.T. SCHIEMANN (instructed by Messrs, Walton, Bright & Go,) appeared on behalf of the Respondent Defendant.
The plaintiffs, Halesowen Presswork & Assemblies, Ltd., were dealers in kitchenware. They were controlled by Mr. Jack Lewis and his family. They carried on business in Halesowen, Worcestershire. They kept their trading account at Lloyds Bank, Halesowen, where they had a large turnover. But they had a loan account with the Westminster Bank at Colmore Row, Birmingham.
The plaintiffs were closely associated with two other companies of the Lewis family. One was Lewis Distributors Ltd. The other was Jack Lewis Property (Halesowen) Ltd. These two companies also banked with the Westminster Bank, but their accounts were kept at the Marble Arch branch in London.
In February 1968 the Westminster Bank were much concerned with the accounts of these three associates companies. They were disturbed at the size of the overdrafts. On the 15th February, 1968, the plaintiffs, the Halesowen Company, owed them a sum of £11,338 on the Birmingham account. The other two companies owed them £143,289 and £9,337 on the Marble Arch accounts. The Westminster Bank put much pressure on the Lewis family to secure this Indebtedness, but without success. A little later the three companies called in a chartered accountant, Mr. Bernard Phillips, to help them sort out their affairs.
Eventually an important meeting was held on the 4th April, 1968, between high officers of the Westminster Bank and Mr. Frank Lewis and Mr. Bernard Poilllps. At that date the overdraft at the Marble Arch branch was £146,288 owing by Lewis Distributors Ltd., and the overdraft at the Birningham branch was £11,339", owing by the Halesowen Presswork & Assemblies Ltd.
At this meeting the Lewis concerns wanted time to sort out their affairs. The Westminster Bank wanted to get the Halesowen Company to transfer the trading account which they had at Lloyds Bank, Halesowen, to the branch of the Westminster Bank at Colmore Row, Birmingham. It appeared that the Halesowen Company had big cheques coming in regularly from a company called Girling Limited, which amounted to as much as £15,000 at a time. The HalesowenCompany used to pay these cheques into their trading account at Lloyds Bank at Halesowen. That account was conducted on a credit basis, and they paid their wages out of it. At the meeting Mr. Frank Lewis told the bank officers, quite frankly, that they did not pay their trading receipts into the Westminster Bank because they were afraid that the Westminster Bank would seize on to them to meet the overdraft.
The upshot of the meeting was that the Halesowen Company agreed to transfer its trading account from Lloyds Bank at Halesowen to the Westminster Bank at Colmore Row, Birmingham; so that in future there should be two accounts of the Halesowen Company at Colmore Row, Birmingham. One of these was the existing account on which there was an overdraft of £11,339. This was to be frozen with no more transactions on it. It was to be the No. 1 Account. Then there was to be opened a new account into which was to be paid all the cheques coming in to the Halesowen Company. This was to be the No. 2 Account, and was to be kept always in credit. It was to be debited with the Interest on the overdraft on the No. 1 Account, These arrangements were to continue for the next four months unless there was a material change of circumstances,
On the 17th April, 1968, the Westminster Bank sent a letter to the Halesowen Company setting out the arrangements, including these important sentences:
"So far as the existing account at our Birmingham Branch of Halesowen Presswork & Assemblies Limited is concerned, this is to be frozen at its present figure and no further transactions save for permanent reduction are totake place thereon…. As part of the arrangements it was agreed that all of the Company's business should be passed through Westminster Bank, and I look to you, therefore, to arrange for the account with Lloyds Bank to be closed so that all transactions hence forward may be passed through a new account to be opened at Birmingham Branch. This new account is, of course, to be maintained strictly on a credit basis and you should have in mind that the bank charges, including interest on the indebtedness at Birmingham, will, in the usual way, be debited to this new account……………….
"You undertake to come to a decision regarding a sale of Halesowen Presswork & Assemblies Limited within the next four months, and, In the absence of materially changed circumstances in the meantime, we for our part will adhere to the present scheme of arrangements for this period of time."
On the 22nd April, 1968, the Halesowen Company by Mr. Frank Lewis replied:
"I accept the conditions and arrangements that have been laid out."
Accordingly, there were thenceforward from the 26th April, 1968, two accounts of the Halesowen Company at the Westminster Bank, Colmore Row, Birmingham. One was the No. 1 Account, which was frozen, with an overdraft of £11,339- The other was the No. 2 Account, which operated on a credit basis, so that the incoming cheques were always sufficient to cover the outgoings.
The Halesowen Company, however, got further into the mire. Only one month later they decided to go into a creditors' voluntary winding-up. On the 20th May, 1968, they called a meeting for the 12th June, 1968, to consider a resolution to wind-up. They also gave a notice to the creditors pursuant to section 293 of the Companies Act, 1948, saying that:
"A meeting of the creditors of this Company will be held at the Hanover Grand, 6 Hanover Street, London, Wil on Wednesday, 12th June, 1968, at 2.30 o'clock in the afternoon, for the purposes mentioned in Sections 291 and 295 of the said Act."
One of those notices reached the Westminster Bank. They might at this timer have determined the arrangements with the Halesowen Company because of a material change of circumstances, But they did not do so. They decided to continue the No. 2 Account, but to keep a close watch on it. They told the Halesowen Company that it was to be kept in credit at all times.
Now we come to the crucial day, the 12th June, 1968. In the morning of that day, at about 12 noon, one of the staff of the Halesowen Company went to the branch of the Westminster Bank at Halesowen and paid in a cheque drawn by Girlings Ltd. in favour -of the Halesowen Company for £8,611. 5s.10d. In the afternoon, at 2.30 p.m., the resolutions were passed for a creditors' voluntary winding-up; and Mr. Bernard Phillips was appointed liquidator. So the winding-up commenced at 2.30 p.m.
Nevertheless, the bank continued to operate the two counts as before.' On the 12th June, 1968, the cheque for £8,611. 5s.10d. was sent by the Halesowen Branch to the Branch at Colmore Row, Birmingham. It was credited to the Halesowen Company's No. 2 Account on the next day, the 13th June, 1968. It was cleared on the l4th June, 1968. The company drew a wages cheque on the No. 2 Account for £1,075 which the bank honoured. There were one or two other items to the credit of the account. The result on the l4th June, 1968, was that the credit balance on the No. 2 account was" £8,634. 7s.4d. But the company then owed the bank an overdraft on the No. 1 Account a sum of £11,338.
The liquidator claims that the sum of £8,611, 5s.10d. should be applied for the benefit of the general body of creditors and that the bank should prove in the liquidation for the £11,338. But the bank claim that they can take the £8,611, 5s.10d. to pay off pro tanto the indebtedness of £11,338 on No. 1 Account. They say that the agreement for keeping the two accounts separate came to an end on the liquidation: and that they can exercise a banker's lien on the £8,611. 5s.10d., or, at any rate, they can combine the two accounts.
At the hearing before Mr. Justice Roskill the liquidator asserted that at the meeting of the 4th April, 1968, the bank positively agreed that they would under no circumstances seek to set off any balance on the No. 2 Account against the frozen overdraft on the No. 1 Account. But the bank officers denied any such agreement. The Judge found that there was no such agreement. There is no appeal against his finding on that point. So we are left with the agreement of April 1968 which I have stated, namely, that No. 1 Account should be frozen; that No. 2 Account should be kept separate; and that the arrangement was to last for four months unless the circumstances materially changed. It is agreed that, when the notice was given under section 293 on the 20th Nay, 1968, the circumstances did materially change. So the bank could, if they chose, have terminated the arrangement then by giving reasonable notice. If they had done so, the company would, of course, not have paid any more cheques into the No. 2 Account. They would have been at liberty to pay them once again Into Lloyds Bank and would no doubt have done so. So the bank, for their own benefit, did not choose to terminate the arrangement.They had the benefit of continuing the No. 2 Account (into which incidentally was debited the interest on the No. 1 overdraft). Yet the bank say that at the moment of winding-up the arrangement came to an end: with the result that they could then combine the two accounts.
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