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1836.

YOUNG

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,

1836.

YOUNG

BANK OF
BENGAL.

which extended the set off recognised by the common law (Anon., 1 Mod. 215; Peters v. Soame, 2 Vernon, 128). 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

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1836.

YOUNG

BANK OF
BENGAL.

1

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 repaid-
a 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 re-
garded 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 de-
posit, quoad the surplus, amounted to a credit given
whether 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

1836.

YOUNG

v. BANK OF BENGAL.

“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

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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 com-
mission 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 com-
mitted an offence, a breach of trust certainly, a trans-
portable 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

re

(a) Repealed by 7 & 8 Geo. 4, c. 27, but its provisions are enacted by 7 & 8 Geo. 4, c. 29, s. 49.

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