The Gazette 1992

GAZETTE

APRIL 1992

law there appears to be no such intention at all. In the writer's view the proviso cannot be called ambiguous, because the words are clear, and clearly make no change in the law. Assuming that they are ambiguous, it is settled that ambiguity is not enough to effect such a change. This would seem an excellent place to use the maxim of Byles J in R -v- Morris: 31 "It is a sound rule to construe a statute in conformity with the Common Law rather than against it except where or so far as the statute is plainly intended to alter the course of the Common Law." 32 Clayton's case is a part of the Common law, and it is entirely possible to read Section 288 in conformity with it, even if such a reading cuts down the operation of the Section. In the absence of a clear intention to change the law, normal rules of construction suggest that the rule in Clayton's case must apply. "Clayton's case is a part of the Common law, and it is entirely possible to read Section 288 in conformity with it, even if such a reading cuts down the operation of the Section. In the absence of a clear intention to change the law, normal rules of construction suggest that the rule in Clayton's case must apply." Applying the Mischief Rule There are however certain rules of construction which might support Barron J's reading. The most obvious is the ancient mischief rule. The classic statement was in Heydon's case: 33 "Four things are to be discerned and considered:

as part of the Common Law. Further it will be recalled that Barron J's approach would involve deeming: "Where there is an unbroken account between the company and the Debenture holder . . . that it has been broken and a new account opened". No doubt the obvious way to avert the Rule is to open a new account: 25 this, however, is a matter for the parties to agree. One must question the artificiality of "deeming" an unbroken account to be broken, especially as Section 288 says nothing on the matter. Further, appropriation involves contractual rights: the right in the first case of the payor or by default the payer to determine which lodgement shall repay which debit. Clearly Barron J's intrepretation must defeat the creditor's right to appropriate. Is his reading allowable? There is of course no presumption, or at most a very weak one, 26 that a statute is not intended to change the Common Law; but there is a presumption that any such change will be specified in the clearest possible terms 27 and it has been suggested 28 that the greater the proposed change, the clearer the words must be. Therefore Section 288 can be held to have changed the law on appropriation of payments if this is the plain meaning of the words used or the inevitable consequence of those words. 29 What then are the words which clearly indicate the change in the law? The proviso reads:- "Except to the amount of any cash paid to the company at the time of or subsequently to the creation of and in consideration for the charge". What strikes one is not the clear intention to change the Common Law, but the failure to refer to any Common Law provision at all. The words "cash p a i d" can no doubt refer to a running account to which lodgments are made: but in what way does the clause affect the existing law governing such accounts? So far from showing a clear intention to change the existing

What remedy the Parliament hath resolved and appointed. . . .;

The true reason of the remedy; . . . always to make such construction as shall supress the mischief and advance the remedy." 34 The language used by Barron J suggests that he had in mind the mischief aimed at by Section 288. But what precisely is this mischief? Presumably it is the preferring of one creditor of a company to the others and the risk of diminishing the fund available generally in a winding up. In such case why is there a proviso? The explanation given in numerous cases 35 and apparently accepted by Barron J for a proviso of this kind is to protect bona fide transactions entered into in the usual course of business: but Barron J was satisfied that the transactions before him were bona fide. 36 Therefore Section 288 has two aims which if not directly in conflict may pull in different directions, and to apply the Rule in Clayton's case is consistent with one of these aims but not the other. On its own, it appears that the mischief rule would not solve anyting, since it cannot be said that Section 288 has a single clear aim of curing mischief. Can the proviso be cut down so as to make the Section operate effectively? It is true that special rules are sometimes applied to a proviso: for example where powers are conferred by statute and a proviso appears to cut them down, the proviso will be intrepreted as restrictively as possible. 37 It has further been said that a proviso must not be read literally but merely as one clause in a general enactment. In R -v- Dibdin 38 Fletcher Moulton LJ referred to:- "The fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as a proviso . . . the Courts . . . have refused to be led astray by arguments such as those which have been addressed to us which depend solely on taking words absolutely in their strict literal sense, disregarding the fundamental consideration that they appear in a proviso'.. 39 117

What was the Common Law before the making of the Act?

What was the mischief and defect for which the Common Law did not provide.