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Appropriation is the right to apply a credit to a particular debt. The first right of appropriation belongs to the customer, if they do not appropriate the bank then assumes the right, if neither appropriate then Clayton’s Case (Devaynes v Noble 1816) applies. Appropriation can be express, such as writing the account number on a slip or implied, depositing exactly the same amount as a written cheque on an overdrawn account. Either way the customer is clearly stating which debt he wishes to apply the credit to. Upon insolvency the customer loses the right to appropriate, for example in the allocation of proceeds resulting from the realisation of security; Re William Hall Contractors.
Clayton’s Case applies where there is a single, running, current account and states that if neither party appropriate then credits are applied to debits in strict chronological order, the oldest debits cleared by the earliest credits. This can be of particular importance when an overdrawn account is made up of both preferential and non-preferential debts (such as cheques paid for wages mixed in with normal trade debts) and a decision needs to be made as to the preferential element of the bank’s debt.
5www.ciobs.org.uk/qualifications/pastpapers/AssociateshipExamsAutumn2006.pdf
Appropriation is the right to apply a credit to a particular debt. The first right of appropriation belongs to the customer, if they do not appropriate the bank then assumes the right, if neither appropriate then Clayton’s Case (Devaynes v Noble 1816) applies. Appropriation can be express, such as writing the account number on a slip or implied, depositing exactly the same amount as a written cheque on an overdrawn account. Either way the customer is clearly stating which debt he wishes to apply the credit to. Upon insolvency the customer loses the right to appropriate, for example in the allocation of proceeds resulting from the realisation of security; Re William Hall Contractors.
Clayton’s Case applies where there is a single, running, current account and states that if neither party appropriate then credits are applied to debits in strict chronological order, the oldest debits cleared by the earliest credits. This can be of particular importance when an overdrawn account is made up of both preferential and non-preferential debts (such as cheques paid for wages mixed in with normal trade debts) and a decision needs to be made as to the preferential element of the bank’s debt.
5www.ciobs.org.uk/qualifications/pastpapers/AssociateshipExamsAutumn2006.pdf
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