CHAPTER Pleading. Particulars of set-off. SET-OFF IN When the mutual credit must have existed. ant, he must consent to reduce his verdict in the action where he is plaintiff, by the amount to which he has made his set-off available in the action where he is defendant (g). A discharge under the Insolvent Debtors' Act must be replied specially (h). Under the informal replication that the plaintiff never was indebted, he cannot prove payment, as he might under the common replication that he was not, nor is, indebted (i). The plaintiff may under the common replication show want of mutuality (j). If a defendant does not deliver particulars of set-off in compliance with a Judge's order, he is precluded from giving evidence of it at the trial (k). Secondly, Set-off under the Bankrupt Act. Set-off in bankruptcy was first given by the 4th Anne, c. 17, s. 11, re-enacted by 5 Geo. 2, c. 38. These statutes enact that the mutual credit must have been before the bankruptcy; and, therefore, it was decided, where a debtor to the estate claimed to set off notes of the bankrupt, that it was for him to show that he took the notes before the act of bankruptcy (1). The 46 Geo. 3, c. 135, s. 3, enacted, that one debt or demand might be set off against another, notwithstanding a prior act of bankruptcy, provided the credit were given to the bankrupt two months before the date of the commission, and provided the person claiming the set-off had no notice of an act of bankruptcy, or that the bankrupt was insolvent, or had stopped payment. The 6 Geo. 4, c. 16, s. 50 (repealed, but re-enacted by the 12 & 13 Vict. c. 106, s. 171) (m), goes still further, and allows all debts to be set off, whether contracted before or after the act of bankruptcy, provided no notice of a specific act of bankruptcy when the credit was given can be brought home to the debtor. In case, therefore, of a country banking-house (g) Baskerville v. Brown, 2 Burr. 1229. (h) Ford v. Dornford, 8 Q. B. 583. (i) Stockbridge v. Sussams, 3 Q. B. 239; Miller v. Atlee, 3 Exch. 799. (j) Arnold v. Bainbridge, 9 Exch. 153. (k) Ibbett v. Leaver, 16 M. & W. 770; Young v. Geiger, 18 L. (1) Marsh v. Chambers, 2 Stra. 1234; Dickson v. Evans, 6 T. R. 57; Oughterlony v. Easterby, 4 Taunt. 888; Moore v. Wright, 6 Taunt. 517; 2 Marsh. 209, Š. C. (m) Not repealed or altered in this respect, by the 24 & 25 Vict. c. 134. stopping payment, there does not now seem any necessary legal objection to a set-off by the debtors of a firm, of notes bought up by them in the interval between the stopping payment and the issuing of the commission. If, indeed, when the doors and windows of a bank are closed, the bankers either withdraw from the bank, or shut themselves up in it, and so avoid any communication with their creditors, they commit an act of bankruptcy by keeping house or absenting themselves, with intent to defeat their creditors (n). But if, on stopping payment and closing the bank, they are, from illness, unable to be seen, or the creditors are referred to them at their banking-house, or at their private houses, the mere circumstance of stopping payment is not an act of bankruptcy; and notes taken by a debtor to the firm, after knowledge that the firm had stopped payment, may be set off (o). Notice of acts of bankruptcy by some members of a banking firm, without notice of an act of bankruptcy by another member, will take away the right to set off (p). But a man cannot buy up and set off notes and bills, known by him to have been given by the bankrupts for the accommodation of other persons (q). CHAPTER XXVII. A debtor to the bankrupt's estate cannot set off a bill or Fraudulent note transferred to him by the real owner, even before the set-off. bankruptcy, for the mere purpose of being set off against a demand by the bankrupt's estate, so that the real owner might receive 20s. in the pound (r). For in such a case the debtor is a mere trustee for others, and having no real cross demand of his own against the estate, cannot be allowed to set off another man's (s). But if the notes were handed over to the debtor to the estate for an antecedent debt due to him from the owner of the notes, they may be set off (t). Mere legal debts, without any beneficial interest in the creditor, may be set off under the general statutes of set-off, but not under the mutual credit clause. "The object of the mutual credit clause," says Parke, B., "is to do sub (n) Cumming v. Baily, 6 Bing. 363; 4 Moo. & P. 36, S. C. (0) Hawkins v. Whitten, 10 B. & C. 217; 5 Man. & R. 219, S. C.; Dickson v. Cass, 1 B. & Ad. 343. (p) Dickson v. Cass, 1 B. & Ad. 343; and see Craven v. Edmondson, 6 Bing. 734; 4 Moo. & P. 622, S. C. (q) Ex parte Stone, 1 G. & J. 191. (r) Fair v. M'Ivor, 16 East, (s) Forster v. Wilson, 12 M. & stantial justice between the parties, where a debt is really Nor can the assignees of the bankrupt deprive a man of a set-off, once existing (x). We have seen, that the general statutes of set-off only authorize a set-off of mutual debts; but the Bankrupt Acts have long authorized the set-off of mutual credits, as well as of a mutual debt. The recent act, 32 & 33 Vict. c. 71, s. 39, introduces a set-off, not only where there have been mutual debts and credits but mutual dealings. It has been decided that the term mutual credit is more comprehensive than the expression mutual debts. In the first place, it has been held, that credit need not necessarily be of money. Therefore, where a trader, being indebted to a packer on a note of hand, sent him certain goods to pack, the trader having become bankrupt, Lord Hardwicke thought that the packer was entitled to set off against the price of the goods, not only the charge for packing, but the money due on the note (y). This decision, however, goes further than any other, and was qualified very soon after by the same learned person (z). The law is now taken to be, that, in order to set off goods, the property must have been deposited with an authority to turn it into money; in other words, the mutual credit must be such as was intended to terminate in a debt (a). Therefore it has been held, that where, in consideration of the bankrupt's acceptance, defendant promised to indorse a bill to the bankrupt, such promise was not a subject of mutual credit (b). And the mutual credit must have actually existed between the bankrupt himself and the other party (c). There may be mutual credit in bankruptcy, though one of the debts constituting it be not due; as if it be a bond, bill, or note payable at a future day (d). §1) vno (u) Forster v. Wilson, 12 M. & W. 191. (x) Edmeads v. Newman, 1 B. (y) Ex parte Deeze, 1 Atk. 228. 235. (a) Glennie v. Edmunds, 4 Taunt. 775; Rose v. Hart, 8 Taunt. 499; 2 Moo. 547, S. C.; Easum v. Cato, 5 B. & Al. 861; 1 Dowl. & R. 530; Sampson v. Burton, 2 B. & B. 89; Russell v. (b) Rose v. Sims, 1 B. & Ad. (c) Young v. Bank of Bengal, 1 Moore's P. C. C. 150. But as to this case, see Naoroji v. Chartered Bank of India, L. R., 3 C. P. 444. (d) Ex parte Prescott, 1 Atk. An acceptance of the bankrupt's may be set off as an ingredient in mutual credit, notwithstanding that it was not due at the time of the bankruptcy, and was in the hands of an indorsee (e). And where a bill is indorsed, credit may be deemed to be given to the indorser as well as to the acceptor, and therefore if the indorser become bankrupt, the indorsement may be an ingredient in mutual credit (f). A bill accepted for the accommodation of the bankrupt is within the mutual credit clause (g), and may, under that clause, be set off against a demand by the assignees for money had and received to their use after the bankruptcy (h). CHAPTER need not be It is not necessary, to constitute mutual credit, that the Mutual credit parties both intended there should be mutual credit; it is sufficient though one take, by indorsement from a third party, the note or acceptance of another without his knowledge (i). But where goods or bills are deposited with a direction to Breach of trust. turn them into money and apply the proceeds in a particular manner, if the party receiving the property is guilty of a breach of trust he cannot claim the benefit of a set-off under this section (k). guish a lien. But mutual credit will not destroy a lien created by ex- Mutual credit press contract. C. held M.'s acceptance for 241., and sent does not extinM. an article to be repaired by him. It was agreed that C. should pay M. the amount of the repairs in ready money. Before the repairs were completed M. became bankrupt. Held, that C. could not, by virtue of his cross-demand on the acceptance, sue M.'s assignees in trover for the article before paying the amount of the repairs (1). 230; Atkinson v. Elliott, 7 T. R. 378. (e) Collins v. Jones, 10 B. & C. 777; Bolland v. Nash, 8 B. & C. 105; 2 Man. & R. 189, S. C.; Russell v. Bell, 8 M. & W. 277. (f) Alsager v. Currie, 12 M. & W. 755; and see Starey v. Barns, 7 East, 435; see Young v. Bank of Bengal, 1 Moore's Privy Council Cases, 150. (g) Smith v. Hodson, 4 T. R. 211; Ex parte Bayle, Cooke's Bkt. Law, 542; Ex parte Wagstaff, 13 Ves. 65; Bittleston v. Timmis, 14 L. J., C. P. 117; 1 C. B. 389, S. C. (h) Bittleston v. Timmis, and see Hulme v. Muggleston, 3 M. & W. 30. The mistake in the marginal note of that case is corrected in Bittleston v. Timmis, ubi supra. (i) Hankey v. Smith, 3 T. R. 507. (k) Key v. Flint, 8 Taunt. 21; 1 Moo. 451, S. C.; Ex parte Flint, 1 Swanst. 30; Buchanan v. Findlay, 9 B. & C. 738; 4 M. & Ry. 593, S. C. (1) Clarke v. Fell, 4 B. & Ad. 404; 1 Nev. & Man. 244, S. C. CHAPTER How taken advantage of. Mutual credit under the Companies Act. SET-OFF IN Set-off in bankruptcy may be either in an action at law, or before the commissioners. A set-off under the Bankruptcy Act is available in all actions, whether for debt or damages. No plea or notice was formerly necessary, though it was usual to plead or give notice as under the general statutes. But now by Rule 8, T. T. 1853, re-enacting R. H., 4 Will. 4, mutual credit must be pleaded. Where the assignees affirm the bankrupt's dealings, they let in his set-off (m). An assignment under the old Insolvent Debtors' Act had no relation back to the commencement of the imprisonment, and therefore the assignees having declared on a sale by the insolvent, after the imprisonment, and before the assignment, not on a sale by themselves, were subject to the defendant's set-off against the insolvent (n). To an action for a debt due to the assignees in their official character, the defendant cannot plead a set-off due from the bankrupt before his bankruptcy (o). But such a set-off may be the subject of mutual credit (p). But where, there being no bankruptcy, a company in process of winding up held acceptances of S., not yet due, but S. the acceptor held bills drawn and indorsed by the company, which bills, the drawees having refused acceptance, had therefore become a present debt due from the company to S.; it was held, on appeal, that the official liquidator of the company had a right to negotiate the acceptances of S., because there was no mutual credit, the case not being within the provisions of the Bankruptcy Act (g). Thirdly, Set-off in equity. The jurisdiction of Courts of equity in set-off does not depend on the statute law; it existed before any act of Parliament on the subject; and has, since the statutes, been exercised in cases which they will not reach (r). Thus, where A. S. directed her bankers to invest a sum of money in the public funds, which they led her to believe they had done, when in fact they had not, A. S. afterwards joining her brother, J. S., in a joint and several note to the (m) Smith v. Hodson, 4 T. R. 211. (n) Sims v. Simpson, 1 Bing. N. C. 306. (o) Groom v. Mealey, 2 Bing. N. C. 138; 2 Scott, 171, S. C.; Wood v. Smith, 4 M. & W. 522. (p) See Bittleston v. Timmis, supra. (q) In re Commercial Bank of India, L. R., 1 Ch. App. 538. See In re Agra and Masterman, L. R., 3 Eq. 337. (r) Story's Equity Jurisprudence, s. 1435. |