Key Facts
- •Docklock Limited (Docklock) appealed a High Court judgment concerning an account of sums received by C Christo & Co Limited (Christo) on Docklock's behalf between October 1, 2014, and September 1, 2016.
- •The case stemmed from divorce proceedings between the shareholders of Docklock and Christo.
- •Christo managed Docklock's properties and received rents, making payments on Docklock's behalf.
- •A prior order (Moylan Order) and a Waiver of Claims and Indemnity Agreement (WCIA) addressed the division of assets and claims between the companies, with exceptions for certain claims related to the accounting of rents and management fees between October 1, 2014, and September 1, 2016.
- •The High Court judge considered the 'Sitting Balance' (amount held by Christo for Docklock on October 1, 2014) and whether certain payments by Christo in October 2014 ('October Disbursements') should be applied against this balance first.
- •The appeal focused primarily on whether Christo could set off the October Disbursements against rents received after October 1, 2014, given the running account between the parties.
Legal Principles
In a running account, payments are appropriated on a 'first in, first out' (FIFO) basis unless otherwise agreed (Clayton's Case).
Clayton's Case (1816) 1 Mer 585, Cory Brothers & Co Ltd v Owners of the Turkish Steamship “The Mecca” [1897] AC 286, Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22
The interpretation of the Moylan Order and WCIA to determine the scope of claims and exceptions related to the accounting period and the applicability of set-offs.
Moylan Order, WCIA
Outcomes
Appeal allowed.
The Court of Appeal held that the High Court judge erred in giving Christo credit for the October Disbursements against post-October 1, 2014 rents. The running account principle dictated that these disbursements should have been applied to the pre-October 1, 2014 debt, and the Moylan Order and WCIA did not override this.
The sum due to Docklock was increased from £291,226.18 to £425,344.90.
This correction reflects the Court of Appeal's finding that the October Disbursements should not have been deducted from Docklock's claim for rents received after October 1, 2014.