As can be the case, creditors may not have just one judgment against a debtor. It can be that there are complicated matters with multiple judgments. It therefore can be difficult to know where to allocate payments. This article considers where there is a judgment for an old debt and current proceedings for a new debt.
The cases of Stepney Corporation v Osofsky, Peter v Anderson and Albemarle Supply Co v Hind & Co show that the court has treated this question in broadly similar ways.
Generally these three cases set down the precedent that the debtor was to decide where to allocate the payments and if the debtor did not specify which debt the payment was to be allocated against then the creditor could choose which debt to allocate it against.
In Peter v Anderson, however the court went further. In that case, the debtor had multiple accounts and made a payment without specifying which account these were to be allocated against. The court said that the debtor can indicate to the creditor either explicitly or impliedly what account they want a payment to be made against.
Again the matter of Albemarle Supply Co v Hind & Co further cements this. The debtor again in this case had not specified how the payments were to be allocated and following payment, the debtor had been informed by the creditor how the payments were to be allocated. The Court found that the debtor could not in those circumstances say that the payments should be allocated differently.
So how does this apply in practice?
It means that how payments are allocated will depend upon what the debtor has said or done when making payment. Therefore if the debtor has explicitly said that a payment is to be allocated against the newer debt, then the creditor has no alternative but to allocate it against that debt.
However if they fail to specify, the creditor is free to allocate it as desired.
Overall a creditor should consider what is said to them when the payment is made but should also ensure that they consider the conduct of the debtor when allocating a payment.
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