Devaynes v Noble

Devaynes v Noble (1816) 35 ER 781, best known for the claim contained in Clayton's case, created a rule, or more precisely common law presumption, in relation to the distribution of money from a bank account.

The rule is based upon the deceptively simple notion of first-in, first-out to determine the effect of payments from an account, and normally applies in English Law in the absence of evidence of any other intention.

The debt accrued at the moment that the sale was made, and not at the time when the subsequent representation was given to Mr. Clayton, with respect to the re-investment of the money in other exchequer bills.

It was attempted to argue that it was a felony; but, in order to make the subsequent conversion of property, of which the possession has been delivered, amount to a criminal charge, it is necessary to shew that the animus furandi existed at the moment when the delivery was made.

The notice, whatever operation it may have in any other question as between Mr. Clayton and the surviving partners, can have none in this case, in which lie was ignorant that any such sum of money was in their hands.

He was willing to trust them with the care of his exchequer bills; but, whether he would transfer to them exclusively the liability, which all had incurred, of answering for the produce of the sale, was a matter upon which he never had an opportunity of exercising any choice.

[Counsel submitted further arguments...] Though the Report, following (I presume) the words of the inquiry directed by the Decree, states the Master's opinion to be that Mr. Clayton has, by his dealings and transactions with the surviving partners, subsequent to the death of Mr. Devaynes , released his estate from the payment of the cash balance of £1713, yet the ground of that opinion is, not that the acts done amount constructively to an exoneration of Mr. Devaynes's estate, but that the balance due at his death has been actually paid off,—and, consequently, that the claim now made is an attempt to revive a debt that has once been completely extinguished.

If neither applied the payment, the law made the appropriation according to certain rules of presumption, depending on the nature of the debts, or the priority in which they were incurred.

“In his quæ præsenti die debentur, constat, quotiens indistincte quid solvitur, in graviorem causam videri solutum.

From these cases, I should collect, that a proposition which, in one sense of it, is indisputably true,— namely, that, if the debtor does [607] not apply the payment, the creditor may make the application to what debt he pleases,—has been extended much beyond its original meaning, so as, in general, to authorise the creditor to make his election when he thinks fit, instead of confining it to the period of payment, and allowing the rules of law to operate where no express declaration is then made.

There are, however, other cases which are irreconcileable with this indefinite right of election in the creditor, and which seem, on the contrary, to imply a recognition of the civil law principle of decision.

The Lord Chief Justice of the Common Pleas explains the ground and reason of the case of Dowe v. Holdsworth in precise conformity to the principle of the civil law.

I should, therefore, feel myself a good deal embarrassed, if the general question, of the creditor's right to make the application of indefinite payments, were now necessarily to be determined.

But this is the case of a banking account, where all the sums paid in form one blended fund, the parts of which have no longer any distinct existence.

In such a case, there is no room for any other appropriation than that which arises from the order in which the receipts and payments take place, and are carried into the account.

Mr. Clayton travels back into the account, till he finds a balance, for which Mr. Devaynes was responsible; and then he says,—“That is a sum which I have never drawn for.

Sums above it, and below it, have been drawn out; but none of my drafts ever reached or affected this remnant of the balance due to me at Mr. Devaynes's death.” What boundary would there be to this method of re-moulding an account?

Suppose there had been a former partner, who had died three years before Mr. Devaynes-What would hinder Mr. Clayton from saying, “Let us see what the balance was at his death?— I have a right to say, it still remains due to me, and his representatives are answer— able for it; for, if you examine the accounts, you will find I have always had cash enough lying in the house to answer my subsequent drafts; and, therefore, all the payments made to me in Devaynes's lifetime, and since his death, I will now impute to the sums I paid in during that period,—the effect of which will be, to leave the balance due at the death of the former partners still undischarged.”—I cannot think, that any of the cases sanction such an extravagant claim on the part of a creditor.

He makes no objection to it,—and the report states that the silence of the customer after the receipt of his banking account is regarded as an admission of its being correct.

But there is this peculiarity in the case,—that it is, not only by inference from the nature of the dealings and the mode of keeping the account, that we are entitled to ascribe the drafts or payments to this balance, but there is distinct and positive evidence that Mr. Clayton considered, and treated, the balance as a fund, out of which, notwithstanding Devaynes's death, his drafts were to continue to be paid.

The underlying principle for the rule is therefore that, absent any contrary agreement between a debtor and their creditor, the oldest liability is the one discharged first.

In Commerzbank Aktiengesellschaft v IMB Morgan plc and others [2004] EWHC 2771 (Ch), the court elected to not apply the rule on the fact of the case (sums held in bank accounts derived from victims of Nigerian advance fee frauds).

[4] Notwithstanding the criticisms sometimes levelled against it, and despite its antiquity, the rule is commonly applied in relation to tracing claims where a fraudster has commingled unlawfully obtained funds from various sources.

Where the firm has a debit balance, the account should be stopped to fix the liability of the estate of the deceased partner and to avoid the operation of the rule in Clayton's case.