Canagaratne v. Chelliah.
1938Present: Moseley J.
CAN AGAR ATNE et al. v. CHELLIAH.
7—C. R. Jaffna, 11,357.
Set-off—Action by liquidator of Cheetu Club—Claim by suretyto set off amount- paid by him to Club against his liability as surety—Set-off not permitted.
Where the plaintiffs as liquidators^ of a Cheetu Club sued the defend-ants, the first defendant as principal and the second and third defendantsas sureties to recover a sum of money under an agreement in respect of acheetu purchased by the first defendant; and where the second, defend-ant sought to set off against the amount claimed a sum of money whichhe had contributed to the club.
Held, that the second defendant was not entitled to the set-off.
^^PPEAL from a judgment of the Commissioner of Requests, Jaffna.
W. W. Mutturajah, for plaintiff, appellants.
No appearance for defendants, respondent.
Cur. adv. vult.
MOSELEY J.—Canagaratne v. Chelliah.
August 3, 1938. Moseley J.—
The plaintiffs (appellants) in their capacity of liquidators of a cheetucompany sued the defendants (respondents), the first defendant asprincipal and the second and third defendants as sureties, for the sum ofRs. 70 due under an agreement in respect of a cheetu purchased by thefirst defendant.
Judgment went by default against the third defendant. The seconddefendant claimed that he was entitled to set off against the amountclaimed a sum of Rs. 105 which he had contributed to the plaintiffcompany and the case went to trial on that issue.
The learned Commissioner held that the second defendant was entitledto set off as claimed, and gave judgment against the first defendant asprayed, and ordered that, if the judgment was not satisfied by the firstdefendant, the second defendant should set off against the decree theamount due to him by the Company, and that the third defendant asa joint and several guarantor should enjoy the benefit of the saidset-off.
The plaintiffs appealed on the ground that the second and thirddefendants are not entitled to a set-off.
Counsel for the appellants argued that in a question of set-off it isessential that the two demands should be of such a character that thegeneral principles of set-off apply (Buckley—The Law and Practice underthe Companies Acts, 11th ed., p. 442), that is to say, that they must be dueto an&from the same persons in the' same right (Leake on Contract, 8th ed.,p. 782). In the case of In re Pennington and Owen, Ltd.' it was heldby Pollock M.R., that “ a joint debt cannot be set off against a separatedebt nor a separate debt against a joint debt
In my view, however, the1 most cogent argument against allowing aset-off in this case is that to do so would amount to giving a creditor in awinding-up preferential treatment.
In the case of Provincial Bill-posting Co. v. Low Moor Iron Co* theplaintiffs sued the defendants for damages for tort and the defendantsclaimed to set off a sum due to them by the plaintiffs under a contract.Buckley L.J., in the course of his judgment said—“ In these circum-stances, if we were to allow a set-off, the result would be that a particularcreditor of the plaintiff company would receive 20 shillings in the poundin respect of his debt, and would thus be preferred to the other creditors.That being so, it seems to me that we ought not to allow that set-off
I prefer to decide this appeal on the authority just mentioned. In myview, the learned Commissioner was wrong in allowing the set-off.
I would therefore allow the appeal with- costs. The judgment of theCourt pf Requests is set- aside and judgment will be entered for theplaintiffs as prayed in the plaint with costs. It is open for the seconddefendant to prove in the liquidation for the amount which he claims inreconvention.
(1925) Ch. Div. at p. 931.
= T9 L. J. I.N.S.) K. B. 102.
CANAGARATNE et al. v. CHELLIAH