tioned, and to which this plea was pleaded, and that the said sums were equal in amount.

Demurrer, on the ground "that the sum sought to be set off is not one capable of being set off in equity."

The sixth plea, to the last count, was similar to the fifth plea, and there was a demurrer thereto on the same ground.

Seventh plea,-as to so much of the first count of the declaration as related to the sum of 3397., parcel of the said sum of 5001. therein mentioned, and also as to the plaintiff's claim in respect of the causes of action in the last count of the declaration mentioned,-that, before the commencement of the suit, the plaintiff was indebted to one Samuel Smith in the sum of 3391., and the defendant, before the commencement of the suit, at the request of the plaintiff, agreed with the said Samuel Smith to pay him the said Samuel Smith the said sum of 3397., and the said Samuel Smith agreed to accept the defendant as his debtor instead of the plaintiff for the said sum of 3391., and the defendant was still liable to pay the same to the said Samuel Smith, whereby the plaintiff's right to recover the said sum of 3391. was and is wholly lost and extinguished.

Demurrer, on the ground "that the seventh plea sets up a mere collateral independent agreement not in any way connected with or relating to the causes of action to which the seventh plea is pleaded." *Eighth plea, as to so much of the first count of the declaration as related to the sum of 1147. 98. 5d., parcel of the said sum of [*453 5001. therein mentioned, and also as to the plaintiff's claim in respect of the causes of action in the last count mentioned,-that, before the commencement of the suit, the plaintiff was indebted to one Alfred Moore in the sum of 1147. 98. 5d., and the defendant, before the commencement of the suit, at the request of the plaintiff, agreed with the said Alfred Moore to pay him the said Alfred Moore the said sum of 114l. 98. 5d., and the said Alfred Moore agreed to accept the defendant as his debtor instead of the plaintiff for the said sum of 1147. 98. 5d., and that the defendant was still liable to pay the same to the said Alfred Moore, whereby the plaintiff's right to recover the said sum of 114l. 98. 5d. was and is wholly lost and extinguished.

Demurrer, on the same ground as the demurrer to the seventh plea. J. Brown (with whom was Hawkins, Q. C.), in support of the demurrers.(a) The first question which *arises is as to the construction to be put upon the contract declared on in the first count,

[*454

(a) The points marked for argument on the part of the plaintiff were as follows:As to the first plea,-" That it is bad, inasmuch as it assumes, that, upon the true construction of the agreement declared upon in the first count, the defendant, on receiving from Watson in one payment a sum exceeding 5007., was only bound to pay to the plaintiff the amount of 5007., and not the additional percentage stipulated to be paid by the agreement; whereas, the plaintiff will insist, that, upon the true construction of the agreement, the defendant was bound to pay to the plaintiff the percentage out of a ll moneys received by the defendant from Watson exceeding the amount of 500l., whether received in one payment or in several payments."

As to the fifth plea,-"That that plea is bad, because it discloses no cross equitable debt whatever, or, if any, none which is the subject of equitable set-off; and also because the alleged equitable set-off is not shown to have arisen out of, or to have been in any way connected with, the plaintiff's legal debt, but appears to have been wholly distinct therefrom and collateral thereto; and also because a court would not restrain by injunction an action brought to recover a legal debt, on the ground of the existence of a cross equitable debt, without some other and further equity entitling to a decree for an account or other relief, which the plea does

whether the plaintiff was entitled to 5007. only out of the 20007. received from Watson, or to 500l. and 10 per cent. on anything beyond that sum which might be obtained. *The contention on the part of the *455] defendant is, that the 10 per cent. is to be chargeable upon the subsequent payments only. The plaintiff, however, submits that, though not very clearly expressed, the agreement is that the 5007. is to be part of the 13007., and is a sum to be paid by way of anticipation of the 10 per cent. The fifth and sixth pleas are also bad. They disclose no cross equitable debts, or, at all events, none which are properly the subject of equitable set-off. To constitute a good equitable set-off, there must be some connection between the two demands, or the defendant must have been induced to give credit to the plaintiff in consequence of his debt to him. In Rawson v. Samuel, 1 Cr. & Ph. 161, it was held that equitable set-off exists in cases where the party seeking the benefit of it can show some equitable ground for being protected against his adversary's demand: the mere existence of cross-demands is not sufficient. Lord Cottenham, C., there says: "We speak familiarly of equitable setoff as distinguished from the set-off at *law; but it will be found *456] that this equitable set-off exists in cases where the party seeking

the benefit of it can show some equitable ground for being protected against his adversary's demand. The mere existence of cross-demands is not sufficient: Whyte v. O'Brien, 1 Sim. & St. 551; although it is difficult to find any other ground for the order in William v. Davies, 2 Sim. 461, as reported. In the present case, there are not even crossdemands, as it cannot be assumed that the balance of the account will be found to be in favour of the defendants at law. Is there, then, any equity in preventing a party who has recovered damages at law from receiving them, because he may be found to be indebted, upon the balance

not disclose; and also because a court of equity would not by reason of a cross equitable debt restrain an action for a legal debt absolutely or perpetually, and that, if such an action should be restrained at all by a court of equity, it would also take the accounts between the parties." As to the sixth plea,-The same as the fifth, with this addition, "that the sixth plea is bad, because it is not averred therein, nor does it appear thereby, that the amount of the alleged equitable set-off equals the amount of the legal debt to which the sixth plea in its introduction purports to be pleaded."

As to the seventh plea,-" That it is bad, because it sets up a mere collateral independent agreement not in any way connected with or relating to the causes of action to which the seventh plea is pleaded, as an answer to those causes of action, which it could not be in point of law; and also that it is bad, because it does not in any way appear therefrom that it was agreed between the defendant and the plaintiff and the said Samuel Smith, or between the plaintiff and the defendant, or between the plaintiff and the said Samuel Smith, that the defendant should become the debtor of the said Samuel Smith instead of the plaintiff, nor that upon and by the defendant becoming instead of the plaintiff the debtor of the said Samuel Smith, the debt due from the defendant to the plaintiff to which the seventh plea is pleaded should be satisfied or extinguished, nor that the debt due from the defendant to the plaintiff and that due from the plaintiff to the said Samuel Smith should be exchanged; nor does the seventh plea show any merger, satisfaction, or extinguishment whatever of the debt to which the seventh plea is pleaded: and that the seventh plea is also bad, because in its introduction it purports to be pleaded not only to so much of the first count as relates to the sum of 3391., parcel of the sum of 500l. therein mentioned, but also to the last count, whereas the plea does not answer the whole of the causes of action to which in its introduction it so purports to be pleaded, inasmuch as it merely answers a debt due to the plaintiff of 3391., without its appearing in any way from the plea that the moneys claimed in the last count, or any part thereof, are identical with or included in the sum of 3391., parcel of the sum of 5007. in the first count mentioned, or any part thereof."

As to the eighth plea,-The same as the seventh, substituting the name of Alfred Moore for that of Samuel Smith, and the sum of 1147. 98. 5d. for 3391.

of an unsettled account, to the party against whom the damages have been recovered? Suppose the balance should be found to be due to the plaintiff at law, what compensation can be made to him for the injury he must have sustained by the delay? The jury assess the damages as the compensation due at the time of their verdict. Their verdict may be no compensation for the additional injury which the delay in payment may occasion. What equity have the plaintiffs in the suit for an account to be protected against the damages awarded against them? If they have no such equity, there can be no good ground for the injunction." That is confirmed by Fisher v. Baldwin, 11 Hare 352, where a quare is suggested, whether equitable set-off is not confined to cases in which the equity of the bill impeaches the title to the legal demand. [BYLES, J.-This is not, and never was a legal debt.] The rule is thus laid down in Story's Equity Jurisprudence, § 1435,-"It would seem, that, independently of the statutes of set-off, courts of equity, in virtue of their general jurisdiction, are accustomed to grant relief in all cases where, although there are mutual and independent debts, yet there is a mutual credit between the parties, founded at the time upon [*457 the existence of some debts due by the crediting party to the other. By mutual credit, in the sense in which the terms are here used, we are to understand a knowledge on both sides of an existing debt due to one party, and a credit by the other party, founded on and trusting to such debt as a means of discharging it. Thus, for example, if A. should be indebted to B. in the sum of 10,000l. on bond, and B. should borrow of A. 20007. on his own bond, the bonds being payable at different times, the nature of the transaction would lead to the presumption that there was a mutual credit between the parties as to the 20007. as an ultimate set-off pro tanto from the debt of 10,000l. But, if the bonds were both payable at the same time, the presumption of such a mutual credit would be converted almost into an absolute certainty. Now, in such a case, a court of law could not set off these independent debts against each other. But a court of equity would not hesitate to do so, upon the ground, either of the presumed intention of the parties, or of what is called a natural equity. If, in such a case, there should be an express agreement to set off the debts against each other pro tanto, there could be no doubt that a court of equity would enforce a specific performance of the agreement, although, at the common law, the party might be remediless." "In the next place (§ 1436), as to equitable debts, or a legal debt on one side and an equitable debt on the other, there is great reason to believe, that, whenever there is a mutual credit between the parties touching such debts, a set-off is upon that ground alone maintainable in equity; although the mere existence of mutual debts, without such a mutual credit, might not even in a case of insolvency sustain it. But the mere existence of cross-demands will not be sufficient to

*justify a set-off in equity. Indeed, a set-off is ordinarily [*458 allowed in equity only when the party seeking the benefit of it can show some equitable ground for being protected against his adversary's demand, the mere existence of cross-demands is not sufficient. A fortiori, a court of equity will not interfere, on the ground of an equitable set-off, to prevent the party from recovering a sum awarded to him for damages. for a breach of contract, merely because there is an unsettled account between him and the other party in respect to dealings arising out of

the same contract." In the note to that section, the learned editor (edit. 6) says: "In Green v. Dorling, 5 Mason R. 212, the court, after citing the principal decisions, summed up the result in the following language: The conclusion which seems deducible from the general current of the English decisions (although most of them have arisen in bankruptcy) is, that courts of equity will set off distinct debts, where there has been a mutual credit, upon the principles of natural justice, to avoid circuity of suits, following the doctrine of compensation of the civil law to a limited extent. That law went further than ours, deeming each debt suo jure set off or extinguished pro tanto; whereas, our law gives the party an election to set off if he chooses to exercise it. But, if he does not, the debt is left in full force, to be recovered in an adversary suit. Since the statutes of set-off of mutual debts and credits, courts of equity have generally followed the course adopted in the construction of the statutes by courts of law, and have applied the doctrine to equitable debts. They have rarely if ever broken in upon the decisions at law, unless some other equity intervened which justified them in granting relief beyond the rules of law, such as has been already alluded to. And, on the other hand, courts of law sometimes set off equitable against legal debts, *459] *as in Bottomley v. Brooke, cited 1 T. R. 619. The American courts have generally adopted the same principles, as far as the statutes of set-off of the respective states have enabled them to act.' The court adhered to the same doctrine in Howe v. Sheppard, 2 Sumner, R. 409, 414, 416, and Gordon v. Lewis, 2 Sumner, R. 628, 633, 634." [WILLIAMS, J., referred to Jones v. Mossop, 3 Hare 568. There, A. was indebted on bond to B.: B. died, leaving 'C. his sole next of kin, who obtained letters of administration of his estate. The estate of B., after all debts, &c., were paid, left a clear residue exceeding the amount of the bond debt. A. became surety for C. by joining in promissory notes. C. became an insolvent debtor, and A. was compelled to pay the notes. C. died, and then the assignee under his insolvency took out letters of administration de bonis non of B., and sued A. on the bond: and it was held that A. might set off the sums which he had been compelled to pay as surety for C. against the bond debt. BYLES, J., referred to Freeman v. Lomas, 9 Hare 109. It was there held that cross-demands existing in separate rights are not in equity (except under special circumstances) allowed to be set off one against the other; and therefore an executor and trustee of a legacy, who was also the residuary legatee, and had become a creditor of the husband and administrator of a deceased legatee, was not, in the absence of any special agreement, allowed to set off his debt against the legacy to which the husband (having survived his wife, the legatee) was, as such administrator, entitled.] Clark v. Cort, Craig & Ph. 154, will be relied on for the other side. It was there held, that, where there are cross-demands between two parties of such a nature, that, if both were recoverable at law, they would be the subject of legal set-off, then, if either of the demands is *460] matter of equitable jurisdiction, the *set-off will be enforced in equity. [BYLES, J.-That is much nearer the point than any case you have yet cited.] The ground upon which it is put by the Lord Chancellor, it is submitted, distinguishes it from the present case. "The deed of 1837," he says, "provided for the past and future trans

actions and dealings of Groocock and Mansfield & Co.; and it provided that it should enure as a security to whomsoever should carry on the business of Mansfield & Co., for the payment of all moneys due in respect of such transactions. The plaintiffs are now the persons filling that situation; they are therefore not merely assignees of a legal debt without the privity of the debtor, but they are assignees of the debt for whom the debtor contracted that the security should enure. The property has been sold, and the amount of the debt, the result of the transactions and dealings, is admitted to be unascertained. The plaintiffs therefore are, as assignees of this debt, and by contract, entitled to what is so due, and to the application of the proceeds of the property in part payment. The case, then, is not that of a mere assignee of a legal debt coming into equity to have the benefit of a set-off which he could not have at law." [BYLES, J.-The latter part of the judgment in Freeman v. Lomas is in your favour. The Vice-Chancellor assumes it to be an established principle, that "where one demand is equitable and the other legal, there is set-off in equity, if there would be set-off at law, had both the demands been legal."] Then, the seventh and eighth pleas are also bad. There is no merger or extinguishment of the debt. The three parties are not brought together. If the defendant had paid Smith (or Moore), it might have done; but, without actual payment, or at least an agreement to discharge the plaintiff from his original debt, it discloses no defence. In 1 Wms. Saund. 210 a (notes to Forth [*461 *v. Stanton), it is said: "There is an exception to the general rule of law, that a chose in action cannot be assigned, viz., that, where there is a debt due from A. to B., and a debt to the same or a larger amount due from C. to A., and the three agree that C. shall be B.'s debtor instead of A., and C. promises to pay B., the latter may maintain an action against C.: Wilso v. Coupland, 5 B. & Ald. 228; Hodgson v. Anderson, 3 B. & C. 842 (E. C. L. R. vol. 10), 5 D. & R. 735 (E. C. L. R. vol. 16); Fairlie v. Denton, 8 B. & C. 395, 2 M. & R. 353. But it is a necessary ingredient to this exception, that the original debt from A. to B. should be extinguished; for, B. cannot sue C., if he retains the right to sue A.: Cuxon v. Chadley, 3 B. & C. 591, 5 D. & R. 417; Wharton v. Walker, 4 B. & C. 163 (E. C. L. R. vol. 10), 6 D. & R. 288." That necessary ingredient is altogether wanting here there is nothing on the face of the plea to show that the plaintiff intended to discharge the defendant till he paid Smith. In Thomas v. Shillibeer, 1 M. & W. 124,† in assumpsit against two defendants, S. and M., for money had and received, the defendants pleaded, as to 25l., parcel, &c., that on, &c., they were carrying on business in partnership, and employing many servants; that, while they were such partners, the plaintiff deposited with them as such partners the said sum of 251., as a security for his faithfully accounting for all moneys received by him as their servant, to be repaid to him on quitting their employ; that they dissolved partnership, and it was thereupon agreed between them that the defendant S. should take upon himself the payment of part of the debts, and retain in his employ certain of the servants; and that the defendant M. should take upon himself the payment of other debts, and retain in his employ others of the servants; and that, in pursuance of such agreement, M. took upon himself the payment of the 251. to the