XXVII. CHAPTER dends under each upon the sums proved, until he shall, together, have received the whole amount. "In cases of bills or notes," says Lord Hardwicke, "where there is a drawer, and, perhaps, several indorsers, suppose two of these persons become bankrupts, the owner may prove his whole debt under each commission, and is entitled to receive satisfaction out of both estates, according to the dividends to be made, and keep the bill (n) until he has received satisfaction for his whole debt; for he has a double security, and it is neither law nor equity to take it from him. But if, before the bankruptcy of one, or before the proof is tendered, he had received payment of part from the other, he could only have proved the residue under the latter bankruptcy, as the form of proving his debt shows, because no more would remain due to him" (o). And not only if any part of a bill have been received by the holder, before he have actually proved it upon the estate of a party, but even if a dividend under another commission have been merely declared, he can only prove for the residue (p). Proof against estate bank rupt in more than one country. Proof against joint and separate estate. Where an estate was bankrupt both in England and in a foreign country, and the holder of a bill had received a dividend in such foreign country, he was not allowed to prove again here until all the creditors had received a dividend after the foreign rate (9). Where the creditor knowingly holds the joint and separate security of partners for the same debt (r), he could not in general prove both on the joint and separate estate (s). The application of this rule to bills on which there were the names of two firms, in which firms were common partners, was involved in great uncertainty (t). Upon principle it should seem that in such cases there should be (n) In re Joint Stock Disc. Co., L. R., 10 Eq. 11. (0) Ex parte Wildman, 1 Atk. 109; 2 Ves. 113; Ex parte Par, 11 Ves. 65; 1 Rose, 76; Ex parte Tayler, 1 De G. & J. 112; 26 L. J., Bank. 58. (p) Cooper v. Pepys, 1 Atk. 106; Ex parte Leers, 6 Ves. 644; Ex parte The Royal Bank of Scotland, 19 Ves. 310; Ex parte Worrall, 1 Cox, 309; see, however, In re Gibson and Johnson, cited 19 Ves. 311; and Ex parte De Tastet, 1 Rose, 16. (q) Ex parte Wilson, L. R., 7 Ch. App. 490. (r) Ex parte Henton, De Gex, 550. (s) See the judgment of Lord Justice Turner in Ex parte Goldsmith, 25 L. J., Bank. 26. But see also Ex parte Thornton, 28 L. J., Bank. 4, where double proof was allowed, and it was said that the rule against it is a technical rule not to be extended. (t) See the authorities collected in Ex parte Goldsmid, 25 L. J., Bank. 25; 1 De G. & J. 257. double proof. Accordingly by the late statute, 32 & 33 Vict. CHAPTER c. 71, s. 37, repealing a somewhat similar enactment in the XXVII. 24 & 25 Vict. c. 134, s. 152, it was enacted, "If any bankrupt is, at the time of adjudication, liable in respect of distinct contracts as member of two or more distinct firms, or as a sole contractor and also as the member of a firm, the circumstance that such firms are in whole or in part composed of the same individuals, or that the sole contractor is also one of the joint contractors, shall not prevent proof in respect of such contracts against the properties respectively liable upon such contracts" (u). ditor holds bills as a Where a creditor proves a debt, and holds certain bills Where a creof exchange or promissory notes, as securities, if any of them be afterwards paid to him, the amount of such pay- security. ment must be expunged from the proof, and the future dividends will be paid on the residue only (x). Where a creditor holds a bill as a security for a smaller sum than the amount of the bill, he may prove against any parties to the bill (except against the party who deposited the bill with him) for the whole amount of the bill, provided he do not receive more than twenty shillings in the pound on the debt due to him from the depositor of the bill (y). A holder who has bought up the notes or accept- Proof of bill ances of the bankrupt after the bankruptcy will be acquired after admitted to prove (2), provided that, at the time of the acceptor's bankruptcy. (u) Ex parte Honey, L. R., 7 Ch. App. 178; 41 L. J., Bank. 9. (x) Ex parte Smith, Cooke B. L. 175, 191; Ex parte Barratt, 1 Glyn & J. 327; Ex parte Bloxham, Cooke B. L. 176; Ex parte Burn, 2 Rose, 55; Ex parte Rufford, 1 G. & J. 41; Ex parte Brett, 40 L. J., Bank. 55; In re Barned's Bank, L. R., 10 Chan. App. 198. See further as to the mode of dealing with bills which have been deposited as a security, Ex parte Baldwin, 19 Ves. 230; Ex parte Towgood, 19 Ves. 229; Ex parte Rushworth, 10 Ves. 419; Ex parte Rufford, 1 G. & J. 41; Ex parte Brown, 1 G. & J. 407. As to proof by one partner against the estate of his co-partner for any debt in respect of the partnership, see Ex parte Maud, L. R., 2 Chau. App. 550. As to secured creditors in general, see s. 40; and Ex parte Jacobs, L. R., (y) Ex parte King, Co. B. L. (2) Ex parte Lee, 1 P. Wms. 782; Ex parte Atkins, Buck, 479; Ex parte Deey, 2 Cov. 423; Ex parte Brymer, Co. B. L. 187; Ex parte Thomas, 1 Atk. 73; Joseph v. Orme, 2 N. R. 180; Mead v. CHAPTER bankruptcy, they were in the hands of a person entitled to prove (a). XXVII. Set-off in bankruptcy. When the mutual credit must have existed. Next as to set-off and mutual credit in bankruptcy. Set-off in bankruptcy was first given by the 4th Aune, 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 (b). 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 12 & 13 Vict. c. 106, s. 171 (c), went still further, and allowed 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 could be brought home to the person claiming the benefit of such set-off. This was still further extended by the Act of 1869 (d), which is substantially reproduced by the provision of the Act of 1883 (e), enacting that where there have been mutual credits, mutual debts, or other mutual dealings between a debtor against whom a receiving order is made, and any other person claiming to prove, an account shall be taken of such mutual dealings, and the balance of the account and no more shall be claimed or paid on either side respectively; but a person shall not be entitled to set-off under this section against the property of the debtor if he had, at the time of giving credit to the debtor, notice of an available act of bankruptcy. In case, therefore, of a country banking-house stopping Braham, 3 M. & Sel. 91; Cowley (a) Ex parte Rogers, Buck, 490; FER. (b) March 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; In re Ryder, 40 L. J., Ch. 63; L. R., 6 Ch. App. 413. (c) Not repealed or altered in this respect by 24 & 25 Viet. c. 134. (d) 32 & 33 Vict. c. 71, s. 69. (e) Sect. 38. payment, there does not now seem any necessary legal CHAPTER objection to a set-off by the debtors of a firm, of notes XXVII. bought up by them in the interval between the stopping payment and the commencement of the bankruptcy. 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 (f). 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 (g). 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 (h). 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 (i). Where an indorser of a bill subsequently becomes the holder, the acceptor having meanwhile become bankrupt, the claim on the bill can be set off against the liability on the indorsement (j). 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 (k). 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 (). But if the notes were handed over to the debtor to the estate for an antecedent debt due to him from the owners of the notes, they may be set off (m). Mere legal debts, without any beneficial interest in the creditor, may be set off under the general statutes of set-off, (f) Cumming v. Bailey, 6 Bing. 191. 363; 4 Moo. & P. 36. (g) Hawkins v. Whitten, 10 B. & C. 217; 5 Man. & R. 219; Dickson v. Cass, 1 B. & Ad. 343. (h) Dickson v. Cass, 1 B. & Ad. 343; and see Craven v. Edmondson, 6 Bing. 734; 4 Moo. & P. 622. (i) Ex parte Stone, 1 G. & J. (j) Mackinnon v. Armstrong, L. R., 2 Ap. Ca. 531. (k) Fair v. M'Ivor, 16 East, (1) Forster v. Wilson, 12 M. & CHAPTER but not under the mutual credit clause. "The object of XXVII. the mutual credit clause," says Parke, B., "is to do substantial justice between the parties, where a debt is really due from the bankrupt to the debtor to his estate” (n). Attempt to deprive of set-off. Mutual credits more compre Nor can the trustees of the bankrupt deprive a man of a set-off once existing (0). We have seen, that the former statutes of set-off only authorized a set-off of mutual debts; but the Bankrupt Acts hensive than have long authorized the set-off of mutual credits, as well as mutual debts. of a mutual debt. The recent Act, 32 & 33 Vict. c. 71, s. 39, introduced a set-off, not only where there have been mutual debts and credits but mutual dealings, and this is preserved under the Act of 1883 (p). Mutual credit need not be of money. 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 (q). This decision, however, goes further than any other, and was qualified very soon after by the same learned person (r). 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 (s). 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 (n) Ibid. (o) Edmeads v. Newman, 1 B. & C. 418; Bolland v. Nash, 8 B. & C. 105. (p) S. 38, see Booth v. Hutchinson, L. R., 15 Eq. 30; Mersey Steel and Iron Co. v. Naylor, 9 Q. B. D. 664. In mutual dealings, only those prior to the commencement of the bankruptcy can be considered unless the act of bankruptcy was secret, in which case the creditor's knowledge fixes the time. Cave, J., In re Gillespie, Ex parte Reid, 14 Q. B. D. 963; 54 L. J., Q. B. 342. (q) Ex parte Deeze, 1 Atk. 228. (r) Ex parte Ockenden, 1 Atk. 225. (s) Glennie V. Edmunds, 4 Taunt. 775; Rose v. Hart, 8 Taunt. 499; 2 Moo. 547; Easum v. Cato, 5 B. & Al. 861; 1 Dowl. & R. 530; Sampson v. Burton, 2 B. & B. 89; Russell v. Bell, 8 M. & W. 277. A mere liability is insufficient. Abbott v. Hicks, 5 Bing. N. C. 578. Eberle, &c. Co. v. Jonas, 18 Q. B. D. 459; 56 L. J., Q. B. 278. |