Docklock Limited v C Christo & Co Limited

Where parties operate a running account, payments are ordinarily appropriated on a first-in, first-out basis, unless an alternative appropriation is agreed. The principle applies beyond bank accounts where transactions are intended to be aggregated rather than settled separately. A later court order or contractual waiver preserving claims for receipts during a defined period does not, without clear words, retrospectively undo an appropriation already made. Payments which discharged earlier indebtedness cannot be credited again against liability for later receipts.

Docklock, a property company, claimed an account of rents received by its former managing agent, Christo, between 1 October 2014 and 1 September 2016. An ancillary relief order and related waiver agreement preserved claims concerning receipts during that period while waiving other claims.

After a nine-day trial, the High Court, in [2021] EWHC 308 (Ch), found £291,226.18 due. It allowed credit for three October 2014 payments against the account. Docklock appealed, arguing that those payments had already discharged an earlier balance under the running account. A further ground concerning staff salaries was conditional on that ground failing.

The appeal was allowed. Lord Justice Newey gave the leading judgment, with Lord Justices Nugee and Lewison agreeing.

1. Running account. The parties accepted, and their rental statements demonstrated, that they operated a running account. Such an account is not confined to banking relationships. Its characteristic is that transactions are not settled separately but are carried into an overall balance, with an expectation of continuing debits and credits. The court used the approach described in W H Smith Travel Holdings Ltd v Twentieth Century Fox Home Entertainment Ltd [2015] EWCA Civ 1188 and Airservices Australia v Ferrier (1996) 185 CLR 483.
2. Appropriation. Under the ordinary first-in, first-out principle from Clayton’s Case (1816) 1 Mer 585, the October payments were appropriated to the £134,118.72 owed on 1 October 2014. That earlier liability was therefore discharged before the Moylan Order and the WCIA.
3. Effect of the order and waiver. Those instruments preserved Docklock’s claim for rents received during the specified period for which Christo had not duly accounted. They did not retrospectively reallocate payments, revive a discharged pre-period debt, or give credit for payments already appropriated to earlier indebtedness. Christo could receive credit only for payments properly accounting for later receipts.
4. The Master’s judgment concerned the periods for which claims could be brought and did not determine the October payments issue. The second ground of appeal did not require consideration.
5. The sum due was £425,344.90 rather than £291,226.18. Paragraph 1 of the order dated 30 January 2023 was varied accordingly.

1. Court of Appeal (Civil Division). In [2024] EWCA Civ 45, the court allowed the appeal and varied the sum due.
2. High Court of Justice, Business and Property Courts, Business List (ChD). In [2021] EWHC 308 (Ch), following trial, the Deputy High Court Judge assessed the sum due on the account at £291,226.18.