Law of Banking - Claytons Case

Could anybody help me to understand what Claytons Case is and applies too? I'm studying an economics module, regulatory framework of banking and despite the text and other research can't seem to get my head around what it actually means? Thanks!

Reply 1

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Reply 2

sph93

Original post by bretters

Hi.

I've done Clayton's case in tracing. Which is where someone's property ends up in the wrongful hands of a third party. It's then traced to find out where it is basically.

Clayton's case applies to current accounts. It created the first in, first out rule. So... a bank account starts off at £0 and the defendant pays in £500 of his own money, then £500 of the beneficiaries money. All the assets bought with the first £500 still belong to the defendant. The remaining £500 can have a charge put on it by the beneficiary. Or, if the last £500 is spent on a painting, then the beneficiary traces into that painting.

It gets more complicated when, for example, the defendant buys a car costing £750. Basically then £250 of that car would belong to the beneficiary.

Obviously that's all reversed if it's the beneficiaries money which is paid in first.

It doesn't apply in some instances. For example if the defendant buys profitable assets with his money and dissipates the rest of it, because it would cause an injustice.

At least that's what I understand of it. Hope that makes sense!