The claimants transacted their foreign exchange business through the bank. When their accounts went significantly overdrawn the bank refused to honour further cheques. The claimants claimed that they had instructed the bank that no deductions from any of their accounts could be made without specific written authorisation but that despite this instruction, the bank had wrongly debited their accounts so causing them to go overdrawn. There was no contractual documentation evidencing this. The bank counterclaimed for the value of the outstanding overdraft.

The Privy Council held that the bank was entitled to an indemnity in respect of any orally authorised disbursements it could establish. Even if there was documentation purporting to preclude the bank from being indemnified for acting on a customer’s oral instructions, it did not preclude the customer from subsequently giving oral instructions nor the bank from accepting and acting upon such instructions. Subsequent oral instructions could be treated as consensual variations to written contracts.

Morrell and another v Workers Savings & Loan Bank