Jersey: The Nature Of Credits And Debits That Apply When Operating A Bank Account

Executive Summary

On 3 August 2015, the Privy Council has helpfully explained the nature of the credits and debits that apply when operating a bank account.

The Privy Council has also confirmed that backward tracing is possible where there are sufficient links between payments that give rise to a constructive trust and the receipt of such funds, even where the payments out of a bank account were made before the bank account had received the funds to which the claimant is entitled.

This is an exception to or an extension of the general rule that the claimant to a tracing claim must be able to identify the money of the purchasers at every stage of the process.

The reason is that "a court should not allow a camouflage of inter-connected transactions to obscure its true vision of the overall purpose and effect. ... ... ... It should not matter if the steps are part of a co-ordinated scheme if a debt appears in a bank account of an intermediary before a reciprocal credit entry". In re Diplock [1948] Ch 465 at 521.


This judgment is about substance and not form or technical arguments.  It is rather an extension of the general rule of tracing rather than an exception to it.  Where the facts permit, the reality of the position is that the actual date order of credits and debits is not material.  In such a case, they are part of the same overall transaction.  In that sense, is it really backward tracing at all or perhaps merely a convenient label to apply to the principle.

It is considered that substance should, in this area, properly trump technical formality.

The judgment also provides an analytical statement on the nature of a deposit and the consequences of credits and debits.

The Detail

On 3 August 2015 the Privy Council on appeal from the Court of Appeal of Jersey gave judgment confirming that backward tracing is possible in certain circumstances, including in the circumstances of this case.

The facts of the case were that the Plaintiff had successfully claimed that two BVI companies were liable as constructive trustees of US$10,500,055 representing bribes that had been received by a former mayor of Sao Paulo.

It was countered that the liability only amounted to US$7.5m on two alternative grounds:

Firstly, that three payments had come in after other payments out and so could not be the subject of tracing and in any case that there was no basis for backwards tracing.

Secondly, that as the account was a mixed account with other money and that the drawing made reduced the balance below the amount which represented the claimant's money, it followed the amount recoverable is limited to the maximum that can be regarded as representing his money (the level of intermediate balance rule).

The Court of Appeal of Jersey upheld the Royal Court's decision in favour of the plaintiff's arguments.  The Privy Council found that the Royal Court and the Court of Appeal of Jersey were justified in concluding that the necessary connection between the bribes and the receipts were proved and particularly on the admitted link between the sums received by the appellants and the particular bank account.

The Privy Council said at paragraph 38:

"The development of increasingly sophisticated and elaborate methods of money laundering, often involving a web of credits and debits between intermediaries, makes it particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true overall purpose and effect.  If the court is satisfied that the various steps are part of a coordinated scheme, it should not matter that, either as a deliberate part of the choreography or possibly because of the incidents of the banking system, a debit appears in the bank account of an intermediary before a reciprocal credit entry.  The Board agrees with Sir Richard Scott V-C's observation in Foskett v. McKeown that the availability of equitable remedies ought to depend on the substance of the transaction in question and not upon the strict order in which associated events occur."

In addition, a useful analysis of the nature of banking deposits was taken from Foskett v. McKeown [2001] 1 AC 102 HL at 127-128, when Millett L.J. said:

"We speak of money at the bank, and of money passing into and out of a bank account.  But of course the account holder has no money at the bank.  Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder.  The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim.  Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands.  These consist of the debt or part of the debt due to him from the bank.  We speak of tracing money into and out of the account, but there is no money in the account.  There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder.  No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction).  There is simply a series of debits and credits which are causally and transactionally linked.  We also speak of tracing one asset into another, but this too is inaccurate.  The original asset still exists in the hands of the new owner, or it may have become untraceable.  The claimant claims the new assets because it was acquired in whole or in part with the original asset.  What he traces, therefore, is not the physical asset itself but the value inherent in it."

At paragraph 26 of the Privy Council judgment, the above passage was further explained as follows:

"When Lord Millet speaks of "money paid into a bank account" (which then "belongs legally and beneficially to the bank"), generally what happens, in law, is the extinction of one credit/debit and creation of another credit/debit through the banking system, although a bank may sometimes receive payment of money in specie.  So if a customer "pays" a cheque into his account, his bank will present the cheque to the bank on which it is drawn ("the paying bank"), and - provided that the drawer has a credit balance with the paying bank, or a borrowing facility sufficient to cover the amount of the cheque - the paying bank will credit the presenting bank with the amount of the cheque through the banking system, and will debit its customer's account.  The presenting bank may already have credited its own customer's account, in anticipation of the cheque being cleared, in which case a legal purist would say that the statement of account is for the moment inaccurate, and it will be corrected by a corresponding debit entry if the cheque is dishonoured (or should turn out to be a forgery)."

These are useful statements giving an analysis of the nature of a bank deposit and the rights that flow from it.

For further detail on the case click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.