Barlow Clowes International Ltd v Vaughan
The rule in Clayton's Case will not be applied to share out a mixed fund among investors where it would be unjust or impractical, and a pro rata approach may be used instead.
Facts
Barlow Clowes ran investment schemes in which thousands of investors had placed money. The company's directors misappropriated much of the money, and the company collapsed. The remaining assets were not enough to repay all the investors. The question was how the remaining fund should be divided among the investors, who had invested at different times.
Legal principle
The Court of Appeal held that the rule in Clayton's Case should not be applied, because it would be unjust and impractical. Woolf LJ said that the rule is one of convenience, and will not be applied where it would be impracticable or would result in injustice, or would be contrary to the intention of the investors. Since the investors had all intended their money to be invested in a common fund, the remaining assets should be divided between them pro rata, in proportion to the amounts they had invested.
Related cases on tracing and third party liability
- Agip (Africa) Ltd v Jackson [1991] Ch 547
- Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509
- Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476
- BCCI (Overseas) Ltd v Akindele [2001] Ch 437
- Bishopsgate Investment Management Ltd v Homan [1995] Ch 211
- Devaynes v Noble (Clayton's Case) (1816) 1 Mer 572
- El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685
- Federal Republic of Brazil v Durant International Corp [2015] UKPC 35, [2016] AC 297
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