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1836.

YOUNG

V.

BANK OF
BENGAL.

30,176r. 10a. 8p., after paying off the several loans with the interest stipulated. For this sum, with interest at six per cent. after the dates of the several sales, the action was brought. The Bank sought to set off the sum due upon the two promissory notes, which they held as indorsees for value, and which remained unpaid, against this surplus of the deposits made upon the subsequent loans; and the Court, on the case reserved, being of opinion that this set off was competent to the Bank, gave judgment for the defendants, which was entered up the 29th of August 1833, and is now brought before this Court by appeal. The Act under which the proceedings were had upon Palmer & Co.'s insolvency (9 Geo. 4, c. 73) contains a provision (s. 36) similar to the 56th section of the English Act, 6 Geo. 4, c. 16, touching mutual debts and credits; and although there are some words of the latter omitted, particularly those respecting "mutual debts between the parties," and those requiring the commissioners "to state the account between them," yet, as there is a very general declaration that "all such debts due and claims as may be proved under a commission of bankruptcy, according to the Act of 6 Geo. 4, may also be proved in a proceeding under this Act, in the same manner and subject to the like deductions, conditions and provisions as in 6 Geo. 4 are set forth and prescribed," it is manifest that the proceedings are entirely assimilated; that the difference in the preceding portion of the section is immaterial, and that the present question is to be dealt with, and disposed of exactly as if it had arisen in a proceeding of bankruptcy under the English Act.

It is equally clear that in this case the question turns upon the right of set off given by the statute,

which extended the set off recognised by the common law (Anon., 1 Mod. 215; Peters v. Soame, 2 Vernon, 428). But for that extension, it never could be contended that the Bank had a lien upon the securities deposited beyond the amount of the money advanced upon the credit of those securities, since, even in the most favourable view which could be taken, that of the Bank being Palmer & Co.'s bankers, the lien for the general balance of the customer's account would in this case be restricted by the circumstances in which the deposit was made. This is clearly admitted in Davis v. Bowsher, 5 T. R. 488, where the general lien of bankers was perhaps first distinctly ascertained. Nor can it be said that the debt due by Palmer & Co. on the promissory notes discounted had any connexion with their deposit of the securities; for that debt was contracted before those securities were deposited, and the Bank could not have had them in contemplation when it discounted the notes.

The claim of the Bank is accordingly rested upon the 50th section of the Bankrupt Act, which is taken from the 28th section of the 5 Geo. 2, c. 30, with such additions as were supposed necessary for enabling contingent debts to be set off, since these were by the new Act made proveable. Every debt or demand made proveable by the Act against the estate of the bankrupt may by this 50th section be set off "against such estate;" that is, against any debt or demand of the bankrupt's estate. But the former provision is retained, with the addition of the word "demand," taken from 46 Geo. 3; namely, that where mutual credit has been given by the bankrupt and any other person, or where there are mutual debts between the bankrupt and any other person, the commissioners

1836.

YOUNG

v.

BANK OF

BENGAL.

1836.

YOUNG

v.

BANK OF
BENGAL.

shall state the account between them, and one debt or demand may be set against another, and the balance only be claimed or paid on either side.

The question then is, whether or not there were mutual credits or mutual debts between the parties to the transaction now under consideration. That there was both a debt from Palmer & Co. to the Bank, and a credit from the Bank to them, is undeniable. The company were both previously indebted on their notes discounted, and by the money advanced on the deposits; but that is not enough, unless either the Bank was indebted to them or they had given the Bank credit. The only question then is, had Palmer & Co., or had they not, given the Bank credit before the bankruptcy within the meaning of the Act? in other words, was the deposit of the negociable paper —with the power to sell and pay over the surplus, in case the advance made on it should not be repaida credit given to the Bank by Palmer & Co? If it was a credit, we may further observe, that it was so only to the extent of the surplus; for, as far as regarded the monies, to secure which the deposit was made, that deposit was only in presenti a bailment, and even in futuro a payment of Palmer & Co.'s debt to the Bank. The question is, whether or not the deposit, quoad the surplus, amounted to a credit givenwhether or not Palmer & Co., giving the Bank a power to possess itself of the surplus after repaying its own debt when that debt should become due, can be said to be a giving credit to the Bank.

Now, although, generally speaking, debt and credit are correlative terms, and A. giving credit to B. may seem to imply that B. is indebted to A., yet it may be admitted that the introduction of the words

"mutual credit" extends to the right of set off to cases where the party receiving the credit is not debtor in presenti to him who gives the credit; accordingly, the relation contemplated by the statute has been held to be established where the debt is immediately due from the one party and only due at a future day from the other. It was so held in Exparte Prescott, 1 Atk. 230, where the mutual credit was constituted by simple contract debts presently due on the one side and a specialty debt not due on the other, Smith v. Hodson, 4 T. R., 211; Hankey v. Smith, 3 T. R. 507; and many other cases affirm the same doctrine. But in none of those cases was there any uncertainty as to the party said to receive the credit becoming sooner or later debtor in presenti to the other; in none of them did the existence of the relation of debtor and creditor depend upon the pleasure of one party; in all of them the party said to have given the credit had placed the other party in a situation which he himself could not alter-had given him funds of which he could not dispossess him, or, which is the same thing, a power over funds which he could not revoke.

The case is materially different where one of the parties has actually become indebted to the other, and can only cease to be so by paying the debt; but the other has only acquired a power which may end in making him debtor or not, according as the donor of the power pleases. A. is indebted to B., and B. is neither actually indebted to A. nor under any liability which must needs end in his being A.'s debtor, but has only been entrusted with a power over A.'s funds, to be executed at any future time, if A. pleases; but if A. thinks proper, never to be executed at all. Admitting that, in the event of A. never revoking the

1836.

YOUNG

v.

BANK OF

BENGAL.

1836.

YOUNG

ย.

BANK OF
BENGAL.

power, a debt will arise, the existence of that debt is defeasible, the only certainty is, that A., in order to revoke the power, must do an act wholly unconnected with giving B. any credit, namely, discharge a debt due to B. Now, it is not denied that Palmer & Co. could at any time have prevented the Bank from ever receiving the surplus, in respect of the possibility of which surplus arising the credit is supposed to have been given. By repaying the monies advanced, they could regain possession of the deposit, and the power of sale was determined without any consent of the pawnee.

Again, not only did the existence of any debt at any time depend upon the depositor, but he had no such debt as could have been proved under a commission against the pawnee. The words, and every "debt or demand hereby made proveable," added to the recent Act for the purpose of including contingent debts, shows that debts, in order to be set off, are sup posed proveable, which, indeed, appears to follow from the nature of the case. Suppose the Bank of Bengal had been made bankrupt before selling the paper, it is clear that Palmer & Co. could not have proved against their estate for their contingent surplus. The paper was deposited to answer a specific purpose, and if any use had been made of it inconsistent with the terms of the deposit, the pawnee would have committed an offence, a breach of trust certainly, a transportable misdemeanour, if the Banker's Act (52 Geo. 3, c. 63) (a) extends to Bengal. But unless the power of sale was executed by the pawnee (in which case, he became the debtor at once), he never could be said to

(a) Repealed by 7 & 8 Geo. 4, c. 27, but its provisions are reenacted by 7 & 8 Geo. 4, c. 29, s. 49.

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