C. A. 1907 MONT GOMERY RYAN. Clute, J. and I find that not only did they permit inspection of Ryan's account, but their covenant to allow further inspection was the foundation of the agreement without which the assignee Montgomery would probably not have carried out the purchase. The points for decision on this branch of the case upon this somewhat complicated statement of facts are: 1. Have the bank been guilty of a breach of sec. 46 of the Bank Act? 2. If so, does such breach invalidate the whole agreement ? 3. Having regard to the manner in which the note was received, does it preclude the plaintiff Montgomery from recovering on the note ? 4. Is the plaintiff Ryan entitled to damages for the alleged wrong done him by breach of the Bank Act in permitting his account to be inspected and sold? Section 46 of the Bank Act of 1890 is as follows:-"46. (Inspection of books.) The books, correspondence and funds of the bank shall, at all times, be subject to the inspection of the directors; but no person, who is not a director, shall be allowed to inspect the account of any person dealing with the bank.” In Re Chatham Banner Co., Bank of Montreal's Claim (1901), 2 O.L.R. 672, Street, J., suggests "that the intention of the clause probably was to do away with the right which a shareholder in the bank, as a quasi-partner, might possibly have asserted of inspecting the accounts of the banking company." It was held in that case that the clause "does not enable a bank to refuse to disclose its transactions with one of its customers, when the propriety of these transactions is in question in a court of law between the bank and another customer who attacks them, and shews good cause for requiring the information he seeks." This clause was first made a part of the Bank Act of 1871, 34 Vict. ch. 5, sec. 37. It seems probable that the clause was introduced to put at rest the doubt as to the law as it stood prior to this enactment. In Tassell v. Cooper (1850), 9 C.B. 509, Maule, J., expressed doubt as to whether there was any such duty imposed on the bank, while in Foster v. Bank of London (1862), 3 F. & F. 214, it was held that an action lay for this breach of duty, and in Hardy v. Veasey (1868), L.R. 3 Ex. 107, Byles, J., was of opinion that a bank might make such a disclosure on a justifiable occasion. In the present case inspection was allowed with a view of selling the account, and on the sale of the account the bank covenanted to allow future inspection. The question, therefore, resolves itself into this: Had the bank a right to allow inspection with a view of selling, and, having sold, to allow inspection to the purchaser? And is an agreement for sale containing such covenant valid so as to pass the account? The right of inspection was insisted upon by the purchaser and granted by the bank. If the bank had no right to allow inspection, is that part of the agreement valid and the clause only invalid which allows inspection? It is against the policy of the law that any person who is not a director should be allowed to inspect the account of any one dealing with the bank, and, this being so, any agreement which carries with it the right to inspect is in direct contravention of the Bank Act. Indeed, I do not well see how any account could be sold without inspection, and if that be so, a bank has no right to sell a customer's account as such. The evidence shews that the present case is unprecedented so far as the Bank of Montreal is concerned. It is difficult to imagine anything more likely to shake public confidence in our banks than the knowledge that customers' accounts are open to inspection and sale. Great injustice might be done by exposing the private affairs of a customer and selling his account to an avowed enemy or one who desired to use his information as a "lever" for private ends, as was admitted in this Having regard to the high standing of the Bank of Montreal, it is almost incredible that they should so disregard their duty to their customer. case. As I have pointed out, the transfer of the account, collaterals, and note, was under this illegal contract. Montgomery had no other title except that which he received under this contract made in direct violation of the law: Bensley v. Bignold (1822), 5 B. & Ald. 335, 340. I think the whole agreement is void because there is one entire consideration, viz., the sum paid for what Montgomery was to receive. He bargained for an assignment and inspection of C. A. 1907 MONTGOMERY V. RYAN. Clute, J. C. A. 1907 MONTGOMERY บ. RYAN. Clute J. the account, and, assuming that he was entitled to claim a delivery of the note, it also was under the agreement. Even supposing that the assignment of the account was legal, and the agreement to allow inspection illegal, one sum was paid for both, and the whole contract is void: Hopkins v. Prescott (1847), 4 C.B. 578; Alexander v. Owen (1786), 1 T.R. 225, 227. I will deal now with the question of interest. In Dawes v. Pinner (1810), 2 Camp. 486 note, Lord Ellenborough would allow only simple interest on a bank account where the defendant had at different times overdrawn, and the balance was struck at stated times, and interest then charged on the sums found to be due. The House of Lords decided in Page v. Linwood (1837), 4 Cl. & F. 399, that the contract between the parties not providing for compound interest it could not be allowed. Mr. Shepley referred to Mosse v. Salt (1863), 32 Beav. 269, 273. The Master of the Rolls, Sir John Romilly, said in that case: "There can be no question that when a banker and customer carry on a banking account for a series of years, upon a certain specified system, then (assuming it to contain nothing illegal) the Court will assume that there is an agreement between the customer and the banker, and that the account shall be kept upon that principle. In Lord Clancarty v. Latouche (1810), 1 Ball & B. 420, 428, it is distinctly stated, that acquiescence does not amount to a settlement of account, though it regulates the principle on which the accounts shall be taken." In the present case to keep the account upon the system proposed would be to allow 7 per cent. compounded, which would be more than the legal bank rate of interest. In Lord Clancarty v. Latouche, above referred to, the rests were made at the end of the year. It was held in Ex p. Bevan (1803), 9 Ves. 223, that, though compound interest cannot be taken under an antecedent contract, accounts may be settled, even half-yearly, upon that principle. Lord Eldon says: "As to the question of compound interest, it is clear, you cannot â priori agree to let a man have money for twelve months, settling the balance at the end of six months; and that the interest shall carry interest for the subsequent six months; that is, you cannot contract for more than 5 per cent.; agreeing to forbear for six months. But, if you agree to settle accounts at the end of six months, that not being part of the prior contract, and then stipulate, that you will forbear for six months. upon those terms, that is legal." And see Barnum v. Turnbull (1856), 13 U.C.R. 277. From these cases it would seem that a bank may stipulate for compound interest, or such an agreement may be implied from the course of dealing, but in neither case can it be done so as to allow the bank to recover a rate of interest beyond what the law allows. Section 80 of the Bank Act, 1890, is as follows: "(No penalty for usury). The bank shall not be liable to incur any penalty or forfeiture for usury, and may stipulate for, take, reserve or exact any rate of interest or discount not exceeding seven per cent. per annum, and may receive and take in advance any such rate, but no higher rate of interest shall be recoverable by the bank; and the bank may allow any rate of interest whatever upon money deposited with it." R.S.C. 1886, ch. 120, sec. 61. I find that there was no stipulation or agreement as to interest. There was an entry in the discount book of the bank, under Ryan's name, shewing that he was to be charged 7 per cent., but it was not suggested that he had knowledge of such entry. There is a contradiction as to what took place when it came to his knowledge that he was being charged 7 per cent. Ryan says the manager promised to make it right, that is, reduce it to the legal rate. The assistant manager, who was present, says that only referred to the future. I do not think this very material. If the higher rate of interest had been stipulated for and properly charged, there was no consideration to make a reduction, and the promise was a mere nudum pactum. If interest was illegally charged, there is no evidence that Ryan agreed to pay this past overcharge. The question, therefore, is reduced to this-the bank having in fact charged 7 per cent. compounded-is Ryan bound by the monthly receipts given for the cheques? The slips read as follows: "Toronto, 1st February, 1904. "I hereby confirm the statement of my account with the Bank of Montreal, Toronto, to 30th Jan., 1904, as contained in my pass C. A. 1907 MONT GOMERY บ. RYAN. Clute, J. C. A. 1907 MONT GOMERY v. RYAN. Clute, J. book, and acknowledge receipt of all cheques and vouchers to same date. "PETER RYAN, "per K. O'Keefe, attorney." I do not think this confirmation amounts to an acknowledgment that he will pay any rate of interest that may be charged. It may be primâ facie evidence of the correctness of the account, but it surely would not include manifest error, much less illegal charges, if there be such: Rex v. Bank of Montreal (1906), 11 O.L.R. 595, 599. Here the bank seek to charge 7 per cent. compounded monthly. I take the meaning of the statute to be that the bank may stipulate for 7 per cent., and, in default of any contract express or implied, the legal rate of interest for the time applies. I find that there was no contract with Ryan for such rate. In Royal Canadian Bank v. Shaw (1871), 21 C.P. 455, it was held, under a similar section, that on a note bearing no rate of interest upon its face and discounted at 8 per cent., the bank could only charge 6 per cent. Under sec. 80 the bank have a right to receive and take in advance 7 per cent. That is a different thing from compounding monthly at 7 per cent. on the balance. I find no authority for that. Mr. Shepley argued that at all events Ryan had acquiesced in what was done, and cited Williamson v. Williamson (1869), L.R. 7 Eq. 542, but in that case the charges were explained to his agent and no objection made. In Crosskill v. Bower (1863), 32 Beav. 86, it was expressly agreed that the rate of interest should be 5 per cent. per annum, and the custom was to compound at the end of the year, and this was allowed. I do not think sec. 80 permits the bank to charge 7 per cent. compounded monthly. That would in effect be charging more than 7 per cent. This is what the bank have assumed to do, and not being within the limit allowed by sec. 80, it is illegal, whether agreed to or not: Royal Canadian Bank v. Shaw, supra. Applying these findings to the respective actions, I think the action of Montgomery v. Ryan should be dismissed with costs, and the counterclaim dismissed without costs. In Ryan v. Bank of Montreal it was agreed that I should assess |