A claim was made in the liquidations by a creditor, but the creditor also held shares in the company which were not fully paid up.
Held: The creditor plaintiff could recover nothing as a creditor until all his liability as a contributory had been properly discharged. The liquidator of the company was entitled to prove in the winding up of a corporate contributory for the whole amount due by way of calls on the shares without set-off.
Wright J said: ‘There is no contract for a set-off, nor do the articles of association of either company appear to contain any provision for it, nor do the general statutes of set-off apply. Nor, as it seems, is the doctrine of set-off in bankruptcy . . applicable to this case . . But in my opinion this case is governed by the principle established in Grissell’s case [In re Overend, Gurney and Co (1866) LR 1 Ch App 528] and is within the express terms of the Lord Chancellor’s judgment in that case. If the creditor-contributory were allowed to take the dividend without paying the call, he would be receiving payment of part of the debt which the company owes to him without making his contribution to the fund out of which that debt, with the other debts of the company, was to be paid. ‘If’, Lord Chelmsford says, ‘the amount of an unpaid call cannot be satisfied by a set-off of an equivalent portion of a debt due to the member of a company upon whom it is made, it necessarily follows in the last place, that the amount of such call must be paid before there can be any right to receive a dividend with the other creditors. The amount of the call being paid, the member of the company stands exactly on the footing of the other creditors with respect to a dividend upon the debt due to him from the company. The dividend will be of course upon the whole debt, and the member of the company will from time to time, when dividends are declared, receive them in like manner when either no call has been made, or having been made, when he has paid the amount of it.”
Judges:
Wright J
Citations:
[1898] 2 Ch 428
Jurisdiction:
England and Wales
Citing:
See Also – In re Auriferous Properties Ltd (No 1) ChD 1898
African Gold Properties Ltd (the Gold Company) held shares in Auriferous Properties Ltd (the Auriferous Company). In January 1896, the Auriferous Company became indebted to the Gold Company in the sum of pounds 2,775. Two calls were made by the . .
Cited by:
Cited – In re Kaupthing Singer and Friedlander Ltd SC 19-Oct-2011
The bank had been put into administrative receivership, and the court was now asked as to how distributions were to be made, and in particular as to the application of the equitable rule in Cherry v Boultbee in the rule against double proof as it . .
Lists of cited by and citing cases may be incomplete.
Equity, Insolvency
Updated: 07 August 2022; Ref: scu.449848