Cory Brothers & Co. v “Mecca” (Owners of Turkish Steamship)
 AC 286
(Debtor and Creditor – Appropriation of Payments – Right to Appropriate – Intention of Creditor)
Cory Bros. (CB) were holders of four dishonored bills of exchange from H Co., for services to latter’s steamships Mecca and Medina: first on account of Medina, second on account of Mecca, third and fourth of same date, one on account of Mecca and other on account of Medina. Another Co., acting as agent of H, paid 900 pounds as part payment for the debts due. Statement of account (SoA) sent by CB showed Mecca debt above the Medina debt of same date. When H failed to pay the rest of the amount, the action was brought by CB to recover the debt due with respect to Mecca and appropriated 900 p to Medina debts. However, defendant argued that by appropriation in accordance with SoA, Mecca debt has been paid.
- Whether there was any appropriation made by CB with ref. to SoA?
- If no then whether CB can lawfully appropriate the payment towards Medina debts at the time of filing the suit?
House of Lords (HoL) distinguished the present case from Clayton’s case wherein it was held that where there is a current account between the parties, and payment is made without appropriation both by creditor and debtor, then they are to be attributed to the earliest items in the account.
The debts that arose in present case were from entirely different transactions and were never brought together into a common account.
SoA was given by CB to H with the only purpose of showing them what the balance due was, and no other purpose whatsoever. CB neither intended to appropriate payment received w.r.t. any particular vessel nor it intended to return the vessel against which debts were to be set off. Therefore, according to circumstances, the court observed that SoA wasn’t in any way appropriation by creditor.
When debtor is making payment to his creditor w.r.t. several debts, he may appropriate the money as he pleases. The intention of the debtor may be proved not only by his express words at the time of payment but in any other manner evident from circumstances, for eg: when the amount of payment exceeds from interest due (Rama Shah v. Lal Chand)
But if he doesn’t do so, creditor reserves the right to make appropriation “till the very last moment”. He needn’t make his election express and can declare it by bringing an action or in any other way that makes his intention and meaning plain. But, once creditor appropriates the payment and communicates the same to the debtor, he would have no right to appropriate it otherwise. (Rama Shah v. Lal Chand)
SoA can also amount to valid expressway of appropriation by the creditor unless other circumstances point in an opposite direction (as in present case). But, CB had the right to make appropriation even while having an action for the part-payment due, which it duly exercised.
Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)