View source for Foley v Hill

{{italic title}}
{{Use dmy dates|date=November 2022}}
{{Use British English|date=June 2016}}
{{Infobox court case
|name               = Foley v Hill
|court              = [[Judicial functions of the House of Lords|House of Lords]]
|image              = File:John_Wilson_Carmichael_-_A_View_of_Murton_Colliery_near_Seaham,_County_Durham_-_Google_Art_Project.jpg
|imagesize          = 250
|imagelink          = 
|imagealt           = 
|caption            = A British colliery
|full name          = Edward Thomas Foley v Thomas Hill and Others
|date decided       = 1 August 1848
|citations          = (1848) 2 HLC 28<br />9 ER 1002<br />[1843-60] All ER Rep 16
|transcripts        = [http://www.uniset.ca/other/css/9ER1002.html United Settlement transcript]<br />[http://www.commonlii.org/uk/cases/EngR/1844/355.pdf CommonLII transcript]
|judges             = [[Charles Pepys, 1st Earl of Cottenham|Lord Cottenham LC]], [[John Copley, 1st Baron Lyndhurst|Lord Lyndhurst]], [[John Campbell, 1st Baron Campbell|Lord Campbell]]
|number of judges   = 3
|decision by        = 
|concurring         = 
|dissenting         = 
|concur/dissent     = 
|prior actions      = 
|appealed from      = ''Foley v Hill'' 1 Phil 399
|appealed to        = 
|subsequent actions = 
|related actions    = 
|opinions           = 
|keywords           = Bank account, limitation periods
|italic title       = 
}}

'''''Foley v Hill''''' (1848) 2 HLC 28, 9 ER 1002 is a judicial decision of the [[Judicial functions of the House of Lords|House of Lords]] in relation to the fundamental nature of a bank account.  Together with ''[[Joachimson v Swiss Bank Corporation]]'' [1921] 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.<ref name=Ellinger>{{cite book |author1=E.P. Ellinger |author2=E. Lomnicka |author3=C. Hare |year=2011|title=Ellinger's Modern Banking Law |edition=5th|publisher=[[Oxford University Press]] |isbn=9780199232093 |pages=121–122}}</ref>

The case decided that a banker does not hold the sums in a bank account [[Trust law|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.<ref>{{Cite web|url=http://www.cobdencentre.org/2010/09/the-legal-relationship-between-the-banker-and-his-customer/|title=What is the Legal Relationship Between the Banker and his Customer?|publisher=The Cobden Centre|author=Toby Baxendale |date=14 September 2010 |accessdate=5 June 2016}}</ref>

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 [[Fiduciary#No-profit rule|rule against trustee's making a profit out of the trust property]].<ref>''[[Keech v Sandford]]'' [1726] EWHC Ch J76</ref>

==Facts==

[[Edward Thomas Foley]] and [[Sir Edward Scott, 2nd Baronet|Sir Edward Scott]] (who was not a party to the action) were owners of [[North Staffordshire Coalfield|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.<ref name=Facts>{{cite web|url=http://www.uniset.ca/other/css/9ER1002.html|title=''Foley v Hill'' (1848)|publisher=Entreprise United Settlement Limitée|accessdate=5 June 2016}}</ref>

Foley filed a [[bill in equity]] in January 1838 against the banking, claiming that [[Account of profits|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.<ref name=Facts />

The defendant banks pleaded a defence based upon the [[Limitation Act 1623|Statute of Limitations]].<ref name=Facts />

==Judgment==
[[File:Charles Pepys, 1st Earl of Cottenham by Charles Robert Leslie cropped.jpg|thumb|right|200px|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, [[John Copley, 1st Baron Lyndhurst|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 [[Charles Pepys, 1st Earl of Cottenham|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 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]] said the following.<ref>(1848) 2 HLC 28 at 36</ref>

{{Cquote|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 fiduciary responsibility|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 opinions.

==Significance==
The decision has been applied many times since, and has never been seriously questioned.<ref>See for example: {{Cite bailii|litigants=Morris v Rayners Enterprises Inc |year=1997|court=UKHL |num=44 |date=30 October 1997}}.</ref><ref>{{cite book|title=Commercial Law|author=Roy Goode|edition=4th|year=2010|publisher=Penguin|isbn=978-0-141-03022-7|page=579|author-link=Roy Goode}}</ref> Although various earlier cases had also applied the principle that the relationship between banker and customer was one of debtor and creditor,<ref>See for example: ''Parker v Marchant'' 1 Phillips 360; ''Potts v Glegg'' 16 Mees & W 321; ''[[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, whenever it is demanded."</ref> this was the first time that the House of Lords, as the highest court in the land, had affirmed the position.

==Notes==
{{Reflist|2}}

{{DEFAULTSORT:Foley v Hill}}
[[Category:English banking case law]]
[[Category:House of Lords cases]]
[[Category:1848 in case law]]
[[Category:1848 in British law]]