The Gazette 1992

GAZETTE

APRIL 1992

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:

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,

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

and it

has been suggested

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.

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

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

-v-

Morris:

"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."

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:

"Four things are to be discerned and

considered:

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.

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."

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

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.

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

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.

It has

further been said that a proviso must

not be read literally but merely as

one clause in a general enactment.

-v-

Dibdin

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'..

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