Devaynes v Noble (Clayton's Case)
In a running bank account, the first payment in is treated as the first payment out, a rule applied to mixed trust funds.
Facts
Mr Clayton was a customer of a banking partnership. One of the partners died, and the surviving partners continued the business, but the bank later failed. Mr Clayton had paid money into and out of his account both before and after the partner's death. The question was whether the deceased partner's estate was liable for the money Mr Clayton had deposited before his death.
Legal principle
Sir William Grant MR held that, in a current account, payments out are applied to the earliest payments in, on a first in, first out basis. The payments that Mr Clayton had withdrawn after the partner's death were treated as withdrawals of his earliest deposits, so the deceased partner's estate was no longer liable for them. The rule was later applied to tracing where money from several beneficiaries has been mixed in a bank account, although it is often displaced.
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
- Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22
- BCCI (Overseas) Ltd v Akindele [2001] Ch 437
- Bishopsgate Investment Management Ltd v Homan [1995] Ch 211
- 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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