A critique of the rule in Clayton’s Case

Abstract Under the so-called rule in Clayton’s case (Devaynes v Noble, Baring v Noble (1816) 1 Mer 572; 35 ER 767), where a trustee mixes the funds of two separate trusts, or an innocent volunteer mixes trust money with his own money, in an active (running) bank account, withdrawals out of the account are presumed to be made in the same order as payments in (ie, first in, first out). The rule has been criticised both judicially and academically and is the subject of a number of exceptions. This article takes a critical look at the rule and asks whether it still has application in the context of a tracing claim.