§ 38. Equitable set-off. Rule in George v. Clagett. effects it in his own name, but expressly on the face of the policy as agent, he has no right of set-off, even though he acts under a del credere commission (Koster v. Eason, 2 M. & S. 112; Baker v. Langhorne, 6 Taunt. 519; Peele v. Northcote, 7 Taunt. 478), unless the underwriter, notwithstanding the usual clause, "and, or as agent," &c., in the common policy, elects to treat the broker as a principal in his debit and credit account. (Lee v. Bullen, 27 L. J. Q. B. 161.) (d) For a del credere commission, being a contract wholly between the broker and the assured, cannot effect the mutual rights and liabilities of the broker and the underwriter; and, therefore, does not, per se, without other requisites, entitle the broker to his right of set-off. (Peele v. Northcote, 7 Taunt. 478; Houston v. Bordenave, 6 Taunt. 45.) 2. As to returns of premium. (a) The broker being the agent of the underwriter for deducting returns of premium in account between them, may, in an action by the underwriter himself for premium, set off sums due for returns of premium. (Shee v. Clarkson, 12 East, 507.) (b) But the death, or bankruptcy, of the underwriter operates as a revocation of his agency, and the broker therefore cannot, in an action by the assignees or executors, set off unadjusted returns of premium, whether the events entitling to those returns were known before or after the death or bankruptcy. (Minett v. Forrester, 4 Taunt. 541; Goldschmidt v. Lyon, id. 535; Parker v. Smith, 16 East, 382; Houston v. Robertson, 6 Taunt. 448; Houston v. Bordenave, 6 Taunt. 45.) Both the statutes of set-off between solvent parties, and the mutual credit sections of the various bankruptcy statutes, by their terms deal only with cases where the plaintiff or the bankrupt has had immediate dealings with some person seeking to rely upon set-off or mutual credit. But under both classes of statutes equitable set-off has been recognized, sometimes by allowing a defendant to set up a debt due to him by a third party, and sometimes by the Courts having enforced against assignees of a debt or claim equities as between the original parties. The principle of George v. Clagett, 7 T. R. 359, viz., that if a factor, who sells under a del credere commission, sells goods as his own, and the buyer knows nothing of any principal, the buyer may set off any demand he may have on the factor against the demand for the price of the goods made by the principal is an instance of this equitable extension of the statute. (See the rules laid down by Mr. Justice Willes in Semenza v. Brinsley, 18 C. B. N. S. 467, and generally Borries v. Imperial Ottoman Bank, L. R. 9 C. P. 38.) So, too, in the bankruptcy of the buyer the proof of an undisclosed vendor was held liable to be reduced by a claim of the bankrupt against the factor. Nor is it material that the factor in dealing in his own name is acting contrary to his principal's express instructions. (Ex p. Dixon, re Henley, 4 Ch. D. 133.) But it was held in a case where the factor had become bankrupt that a buyer could not in an action against him by the principal for damages for not accepting set-off a demand arising from mutual credit which he had against the factor, mutual credit being merely a statutory mode of settlement between himself and the assignees of the factor, and that the mutual credit, even if it had been otherwise available to the defendant in the action, could not be set up, because the action was one for unliquidated damages. (Turner v. Thomas, L. R. 6 C. P. 610 see and compare Thornton v. Maynard, L. R. 10 C. P. 695.) The decisions in the two last-mentioned cases do not seem to conflict. The right to rely on the set-off arising from the debt of the factor is an equitable right which ought in no way to depend upon whether any one of the parties is or is not bankrupt. The case of Ex p. Dixon, re Henley, ubi sup., merely recognizes an equitable right which would equally have been recognized if all parties had been solvent. The rule in George v. Clagett has never, up to the present time, been extended, in cases where the proceeding has been between solvent parties, to the length of allowing a buyer defendant to counter-claim against the plaintiff vendor for unliquidated damages claimed by the former against the factor. Prior to the Judicature Acts it could not have been so extended, at all events at law, because in answer to a claim for unliquidated damages by the vendor a set-off, even against the vendor himself, could not have been pleaded. It is true that now, since the Judicature Acts, such a set-off can be pleaded to an action for unliquidated damages, or unliquidated damages can be claimed by way of counterclaim to a debt, but the change thus effected is only a change in procedure, and does not make that a defence which was not a defence before. (Pellas v. The Neptune Marine Insurance Co., 5 C. P. D. 34.) Hence these Acts afford no ground for a corresponding extension of the rule in George v. Clagett. And on other grounds such an extension would be inexpedient, for the fact that one of two contracting parties has an outstanding claim against the other can hardly give him any equity to break the new contract. There seems, therefore, to be no reason why the happening of a bankruptcy should introduce a set-off which otherwise § 38. § 38. Mangles v. Rules as to proof of debts. could not have been set up; nor does the case of Ex p. Dixon, re Henley, 4 Ch. D. 133, in any way favour such a proposition. The case of Mangles v. Dixon, 3 H. & C. 702, is an instance where a debtor was allowed to set up against the claim of an assignee of a debt claims of his against the assignor under the contract out of which the debt arose, and that even though the claim so sought to be set up had not ripened into a debt at the time of the assignment. (See also Rawson v. Samuel, Cr. & Ph. 161, 178; Jeffryes v. Agra & Masterman's Bank, L. R. 2 Eq. 674.) But, even in a case where there are at the time of the assignment cross debts between the assignor and debtor, equitable set-off of these cross debts does not necessarily arise, but only where there is an implied agreement amounting to a contract that the one debt shall go in liquidation of the other, or where one debt is secured by or made a charge on the other. (Watson v. Mid Wales Railway, per Willes, J., 36 L. J. C. P. 285.) 39. With respect to the mode of proving debts, the right of proof by secured and other creditors, the admission and rejection of proofs, and the other matters referred to in the Second Schedule, the rules in that schedule shall be observed. Section 168 (2) provides that the schedules shall be construed and have effect as part of the Act. See note to schedule II., post. Rule 1 of that schedule provides that proof shall be made as soon as may be after receiving order; rules 2—5, mode of proof and affidavit; rule 6, creditor to bear cost of proof; rule 7, proof to be open to inspection; rule 8, deduction. of trade discount; rules 9-17, proof by secured creditors, and valuation and sale of securities; rule 18, proof in respect of distinct contracts; rule 19, periodical payments; rule 20, interest; rule 21, debt payable at future time; rules 22-27, admission and rejection of proofs. See also Rules 169-174. As to form of proof, Rule 169, and Form 52. A proof to be used at the first meeting must be lodged with the official receiver not less that one clear day before the meeting, Rule 170. List of proofs, Rule 171. Transmission by official receiver to trustee, Rule 172. Proof to be admitted or rejected by trustee in writing, or further evidence to be required, within fourteen days of its receipt, Rule 173. Time for appeal from rejection or admission of a proof is twenty-one days, Rule 174. § 40. Priority of 40.-(1.) In the distribution of the property of a bankrupt there shall be paid in priority to all other debts,(a.) All parochial or other local rates due from the bank- debts. rupt at the date of the receiving order, and having become due and payable within twelve months next before such time, and all assessed taxes, land tax, property or income tax, assessed on him up to the fifth day of April next before the date of the receiving order, and not exceeding in the whole one year's assessment; (b.) All wages or salary of any clerk or servant in respect of services rendered to the bankrupt during (c.) All wages of any labourer or workman, not exceed ing fifty pounds, whether payable for time or piece- (2.) The foregoing debts shall rank equally between themselves, and shall be paid in full, unless the property of the bankrupt is insufficient to meet them, in which case they shall abate in equal proportions between themselves. (3.) In the case of partners the joint estate shall be applicable in the first instance in payment of their joint debts, and the separate estate of each partner shall be applicable in the first instance in payment of his separate debts. If there is a surplus of the separate estates it shall be dealt with as part of the joint estate. If there is a surplus of the joint estate it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each partner in the joint estate. (4.) Subject to the provisions of this Act all debts proved in the bankruptcy shall be paid pari passu. § 40. (5.) If there is any surplus after payment of the foregoing debts, it shall be applied in payment of interest from the date of the receiving order at the rate of four pounds per centum per annum on all debts proved in the bankruptcy. (6.) Nothing in this section shall alter the effect of section five of the Act twenty-eight and twenty-nine Victoria, chapter eighty-six, "to amend the Law of Partnership," or shall prejudice the provisions of the 38 & 39 Vict. Friendly Societies Act, 1875. c. 60. Sub-s. (1) (a). Sub-s. (1) (b). Sub-s. (1) (c). Clerk or servant; labourer or workman. "The date of the receiving order" is substituted for the date of the order of adjudication, which was the date fixed by section 32 of the Act of 1869. Under the former Act the servant or clerk had to be "in the employment of the bankrupt at the date of the adjudication." These words are omitted in the new section, which substitutes a provision that the wages or salary must be "in respect of services rendered to the bankrupt during four months before the date of the receiving order." A like change is introduced as to the wages of any labourer or workman. The limit in this case is now £50, instead of "not exceeding two months' wages." The wages may now be payable either for time or piece-work. Under the bankruptcy statutes prior to this Act it was always held that to constitute a "clerk or servant in the employment of the bankrupt " the employment must have been something more than an occasional employment. Thus, in Ex p. Walter, re Heath, L. R. 15 Eq. 412, a music-master and drill-serjeant respectively, who gave lessons by the hour in a school, were held, on the bankruptcy of the school-master, not to be clerks, servants, or labourers. Thus, a singer at a place of public entertainment (Ex p. Harcourt, 31 L. T. 188), and an accountant not exclusively employed (Ex p. Butler, 28 L. T. 375), were held not to be servants; but a commercial traveller at an annual salary (Ex p. Neal, Mont. & M'A. 194), a mate of a vessel (Ex p. Homborg, 2 M. D. & D. 642), and seamen (Re Dawson, Fonb. B. C. 229) were held to be servants; and it was also held that, though the service need not be yearly (Ex p. Collier, 4 D. & C. 520), yet there must be more than a mere weekly hiring, though the payment might be weekly (Ex p. Crawfoot, Mont. 270; Exp. Grellier, Mont. 264); and that the services must have been due to the bankrupt exclusively. |