SET OFF. In the absence of any arrange ment, or understanding, to the contrary, a banker has the right to set off a debt owing by him to a customer against a debt owing by the customer to the banker. For ex ample, if a customer has two accounts in his own name, one entitled No. 1 account, which is in credit, and the other No. 2 account, which is in debit, the banker may hold the credit balance (or so much of it as is neces sary) against the debit balance. But where a customer has several accounts, the banker cannot treat as a set off any balance which he knows is held in a fiduciary capacity. An account in the name of " John Brown Trustee of J. Jones " or " John Brown Churchwardens," or in any other similar form, is clear evidence that the money does not belong to John Brown and therefore cannot be used by a banker to liquidate a debt due from Brown, but accounts which are named " John Brown % House " or " a, c Farm," or such like terms, to distinguish Brown's own affairs, may be consolidated.
A credit account at one branch may if not contrary to custom or agreement, be taken as a set off against a debt owing by the same customer at another branch.
Where accounts have been running with out any right to set off being exercised, reasonable notice should, as a rule, be given before acting upon the right.
In the case of a solicitor having a private account and an office account, it has been held (T. 6- H. Greenwood Teale v. William Williams, Brown 6- Co., 1894, 11 T.L.R. 56) that the one may be set off against the other, even though the money in the office account may really belong to his clients.
The credit balance on a partner's private account cannot be taken as a set off to a debt on the firm's account but if the customer is the sole partner then his private account balance may be held against a debt on the account in the firm's name, and, conversely, a credit on the firm's account against the private account.
A customer's deposit receipt may be held against a debt due from him.
A balance on an executor's account cannot be transferred by a banker to clear off an overdraft on the deceased's account. A cheque or order from the executor or administrator is necessary in order to effect such a transfer.
No right of set off exists between a cus tomer's private account and any joint account in which his name appears. Nor, in the case of the accounts of a Local Authority, can a credit on one account be held as a set off to a debit on another account. (See LOCAL AUTHORITIES.) It has been held (Hawkins v. IF hitteh, 1829, 10 B. LS: C. 217) that a customer, who is indebted to a bank, has, in the event of the bank stopping payment, a right to set off against his debt any of the notes of the bank which may be in his possession when he received notice of an act of bankruptcy.
Section 3S of the Bankruptcy Act, 186'3, provides as follows : " Where there have been mutual credits, mutual debts, or other mutual dealings between a debtor against whom a receiving order shall be made under this Act, and any other person proving or claiming to prove a debt under such receiving order, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid on either side respectively ; but a person shall not be entitled under this Section to claim the benefit of any set off against the property of a debtor in any case where he had at the time of giving credit to the debtor, notice of an act of bankruptcy committed by the debtor, and available against him."