Robbie (N. W.) & Company Ltd v Witney Warehouse Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SELLERS,LORD JUSTICE DONOVAN,LORD JUSTICE RUSSELL |
| Judgment Date | 29 July 1963 |
| Judgment citation (vLex) | [1963] EWCA Civ J0729-1 |
| Date | 29 July 1963 |
| Court | Court of Appeal |
[1963] EWCA Civ J0729-1
Lord Justice Sellers
Lord Justice Donovan and
Lord Justice Russell
In The Supreme Court of Judicature
Court of Appeal
(From: Mr, Justice Widgery – Liverpool)
Mr. LIONEL EDWARDS, Q. C. and Mr. JOHN BAMBER (instructed by Messrs, Pritchard, Englefield & Co., Agents for Messrs. Boote, Edgar &. Co., Manchester) appeared on "behalf of the Appellants (Plaintiffs).
Mr. MICHAEL WHEELER, Q. C. and Mr. H. C. EASTON (instructed by Messrs. Skelton & Co., Manchester) appeared on "behalf of the Respondents (Defendants).
This is an appeal "by the plaintiffs from the judgment of Mr. Justice Widgery in favour of allowing to the defendants a set-off against an admitted debt and accordingly in entering judgment for the plaintiffs for £493. 7s. 9d. only, which was admittedly due, instead of for £1,346. 6s. 1d., which the plaintiffs claimed in the action.
The only issue was the validity of the set-off in the particular circumstances. The point is without direct authority and the learned judge rightly observed that it was hardly a suitable case for trial in the course of the Liverpool Assizes.
No oral evidence was adduced and the judgment states the agreed facts and I do not repeat them except in the briefest summary.
The plaintiff company had secured overdrafts on its current account with a bank by a debenture dated 26th January, 1960, which charged its undertaking and all its property and assets present and future to rank as a first charge on its property and lands as a specific charge and as regards all other property and assets of the company as a floating security.
Provision was made for the appointment of a Receiver and Manager at any time after the principal moneys secured became payable. On the 6th July, 1961, a Receiver and Manager was appointed and the charge became effective or crystallised. The company continued to trade under his supervision and continued to sell goods on credit to the defendants so that for goods supplied after the 24th May, 1961, before the Receivership and after there had arisen a total indebtedness from the defendants of £1,346. 6s. 1d.
Between November, 1960, and January, 1961, that is before the Receiver and Manager was appointed, English Spinners Limited, a company associated with the defendants, had sold goods on credit to the plaintiffs and were owed a balance of £852. 18s. 4d. in respect of those transactions. This debt was assigned to the defendants by English Spinners Limited by deed dated the 6thOctober, 1961, and this assignment was not challenged. It entitled the defendants to the benefit of the debt.
The question is whether the debt so due from the plaintiffs can be set off against the defendants' liability to the plaintiffs. The defendants' purchases of the plaintiffs' goods were dealings with the company in the ordinary course of trade, as the Receiver was admittedly the agent of the plaintiff company and not of the bank as debenture holders.
In these circumstances I feel much sympathy with the observations of Mr. Justice Widgery that "where a Receiver carries on the company's business in the name of the company those with whom he deals should not lightly be deprived of the rights of set off to which they would have been entitled if the business were being carried on by the company on its own account", and I have been tempted by a desire to keep commercial trading free from fetters to follow the learned judge and Lord Justice Donovan in his opinion upholding the judgment.
But I have been driven to the conclusion that so to do would not give full effect to the crystallisation of the floating charge on the 6th July, 1961. I think that it must be held that the debenture had the effect of making each debt as it arose after the appointment of a Receiver a chose in action of the company subject to an equitable charge in favour of the bank as debenture holder.
The effect of this was argued before us by the appellants and is dealt with and developed in the judgment of Lord Justice Russell which I have also had the advantage of reading and with which I agree and the reasoning of which I gratefully adopt, with the result that I would hold that there is not that mutuality between the two opposing debts to permit of a set-off.
I would therefore allow the appeal and enter judgment for the full amount accordingly.
Robbie & Co. Ltd. was incorporated in Eire and carries on business there apparently as merchants of textile goods. In January, 1960, it issued a debenture to the Bank of Ireland to secure an overdraft. In July, 1961, the Bank as debenture-holders appointed a Receiver and Manager of the company's business. The debenture imposed a fixed charge from the outset on the company's hereditaments and uncalled capital, and a floating charge on its undertaking, which crystallised into a fixed charge on the appointment of the Receiver.
At that moment the company owed a trading debt of £1852 to an English company known as English Spinners Ltd. The Receiver continued the business of Robbie & Co. Ltd. and in the course of that business sold goods to The Witney Warehouse Co. Ltd. – also an English company. By the 6th October, 1961, this last company was indebted to Robbie & Co. Ltd. for such goods in the sum of £1,346.
English Spinners Ltd. and The Witney Warehouse Co. Ltd. are subsidiaries of the same parent company: and this led to the following transaction. On the 6th October, 1961, English Spinners Ltd. assigned to The Witney Warehouse Co. Ltd. the debt of £852 owed to English Spinners Ltd. by Robbie & Co. Ltd., and due notice of the assignment was given. In January, 1962, Robbi & Co. Ltd. sued The Witney Warehouse Co. for the sum of £1,346 due for goods sold and delivered as aforesaid. The Witney Ware House Co. claimed to set off against that debt the debt of £852 which it had acquired by assignment as aforesaid. Mr. Justice Widgery upheld that claim and gave judgment for Robbie & Co. for the balance of £493 only, which had been paid into Court. Robbie & Co. now appeal, contending that the set-off is net in law allowable.
The question in issue is apparently free from direct authority.
The right of set-off was conferred in 1729 by the statute 2 George II, which was an Act "for the relief of Debtors with respect to the imprisonment of their persons". So far as herematerial, section 13 enacted that "Where there are mutual debts "between the plaintiff and the defendant…one debt may be set off against the other, and such matter may be given in evidence upon the general issue or pleaded in bar as the nature of the case shall require…." This provision was to be a temporary one.
Six years later, however, in 1735, the statute 8 George II chapter 24, by section 4, enacted as follows: "And whereas the provision for setting mutual debts one against the other is highly just and reasonable at all times be it therefore further enacted…that the said clause in the said first recited Act" (that is, section 13 of the Statute of 1729) "for setting mutual debts one against the other shall be and remain in full force for ever".
These statutes were nevertheless repealed by the Civil Procedure Acts Repeal Act, 1879, and the Statute Law Revision and Civil Procedure Act, 1883, with a saving, however, for the right of set-off. The matter is now governed by section 39 (1) (a) of the Judicature Act, 1925, and Rule 3 of Order 19, which however conferred no new rights of set-off. (See Hanak v. Green, 1958 2 Queen's Bench & page 22).
The controversy in the present case turns entirely on the question whether in the circumstances the cross-debts are "mutual debts".
The Receiver is admittedly the agent of Robbie & Co. So that when he sold goods to The Witney Warehouse Co. he was selling on behalf of Robbie & Co. If, therefore, that company wants payment of the resulting debt, why should it not also pay the debt which it owes to the Witney Company? The circumstance that The Witney Company acquired this debt by assignment is irrelevant? (see Bennett v. White, 1910 2 King's Bench page 643). The simple straightforward view is that the company is owed a debt by The Witney Company. It also owes a debt to The Witney Company. The debts are owed and owing in the same right. Why, therefore, should the one not be set off against the other?
The answer given by Robbie & Company is because the debts are not truly mutual. That comes about, it is contended, in the following way. For the purpose of paying what was owing to the Bank the debenture charged all the company's undertaking, property and assets, present and future. So long as the debenture-holder did not intervene, this charge was a floating security on all the property and assets of the company, save only its land and premises and uncalled capital. As regards these assets the charge was a fixed charge from the beginning. When the debenture-holder appointed a Receiver and Manager, however, the floating charge became a fixed charge. There was then, according to the terms of the debenture, a fixed charge, interalia, on all future debts. Thus there was a fixed charge attaching to the debt due to the company and arising from subsequent sales of the company's goods to the Witney Company. That debt is, therefore, one in which the debenture-holder as well as Robbie & Company have an interest. There is, therefore, no mutuality as between this debt and the debt which Robbie & Company owe the Witney Company.
The Witney Company disputes that the debt which it owes is subject to any such charge. It admits that the floating charge crystallised into a fixed charge when the Receiver was appointed, but says it descended only upon the assets then owned by the company, which did not include the debt. The...
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