¹ The first Statute, (1729) 2 Geo. 2, c. 22, s. 13, was a temporary provision intended to last only for a period of five years. However, it was made permanent in 1735 by the second Statute, 8 Geo. 2, c. 24, s. 5. The Statutes of Set-off were repealed by s. 2 of the Civil Procedure Acts Repeal Act 1879 in so far as they applied to the newly founded Supreme Court of Judicature, though it was specifically provided in s. 4(l)(b) that the repeal was not to affect any “jurisdiction or principle or rule of law or equity established or confirmed, or right or privilege acquired.” This has had the effect of preserving the right of set-off originally conferred by the Statutes. See Hanak v. Green [1958] 2 Q.B. 9,22. There was a similar repeal and saving of the right of set-off in relation to courts other than the Supreme Court of Judicature in the Statute Law Revision and Civil Procedure Act 1883.

² There is a defence of equitable set-off available in the case of an unliquidated demand. However, for this the cross demands must be so closely connected that the title of the plaintiff to sue on his demand is impeached. See Rawson v. Samuel (1841) Cr. & Ph. 161, 179. The present article is concerned with independent cross demands arising between the principal, the agent and the third party.

³ In the Insolvency Bill 1985. see clause 164.

⁴ See. e.g. Ince Hall Rolling Mills Co., Ltd. v. Douglas Forge Company (1882) 8 Q.B.D. 179, 183 (“between the same parties and in the same interest”); Shand v. M. J. Atkinson Ltd. (In Liquidation) [1966] N.Z.L.R. 551, 570 (“by and against a person in the same right”).

⁵ Hiley v. Peoples Prudential Assurance Co. Ltd. (In Liquidation) (1938) 60 C.L.R. 468, 488, 497.

⁶ Chittys Blackstone (1826) Vol. 3, 305 note 37.Google Scholar

⁷ See. e.g. Freeman v. Lomas(1851) 9 Hare 109, 116; Cavendish v. Ceaves(1857) 24 Beav. 163; Cochrane v. Green (1860) 9 C.B.(N.S.) 448; Barclays Bank Ltd. v. Aschaffenburger Zellstoffwerke A.G. [1967] 1 Lloyd's Rep. 387.

⁸ Mercer v. Graves (1872) L.R. 7 O.B. 499, 504. See also In re Whitehouse & Co. (1878) 9 Ch.D. 595, 597; In re Paraguassu Steam Tramroad Company, Black & Co.'s Case (1872) L.R. 8 Ch.App. 254, 261. Compare Halsbury's Laws of England (4th ed., 1983) Vol. 42, 253 para. 439. Aliter if the plaintiff, having assigned the defendant's debt, is suing to enforce it on behalf of the assignee, and the defendant's cross demand against the plaintiff/assignor arose before he received notice of the assignment. In such a case it is not considered to be unconscionable for the defendant to rely on the right of set-off available at law under the Statutes of Set-off. See, e.g. Roxburghe v. Cox (1881) 17 Ch.D. 520. 526.

⁹ See In re Anglo-Greek Steam Navigation & Trading Co. Caralli & Haggard's Claim (1869)Google Scholar L.R. 4 Ch.App. 174. The agent for collection in that case admittedly had indorsed the bill back to the inspector of the indorser appointed under the indorser's deed of inspectorship. Nevertheless, Sir G. M. Giffard L.J. said that it was immaterial whether the bills had been got back. See also Barclays Bank Ltd. v. Aschaffenburger Zellstoffwerke A.G. [1967] 1 Lloyd's Rep. 387.

¹⁰ See Chalmers on Bills of Exchange (13th ed., 1964), 129.Google Scholar

¹¹ In an ordinary commercial transaction this would usually include the situation in which an agent discloses that he is acting on behalf of a principal without disclosing the name of that principal. The third party in such a case would agree to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. See Teheran-Europe Co. Ltd. v. S. T. Bellon (Tractors) Ltd. [1968] 2 Q.B. 545,555 per Diplock L.J., and also Goodhart, and Hamson, , “Undisclosed Principals in Contract” (1932) 4 C.L.J. 320, 339, though compare Bowstead on Agency (14th ed., 1976), 355.Google Scholar

¹² Richardson v. Stormont, Todd & Co. Ltd. [1900] 1 Q.B. 701. See also Moore v. Clementson (1809) 2 Camp. 22. However it may be that an agent selling the goods of his principal is entitled by virtue of a lien to receive payment of the price. In such a case an agreement between the purchaser and the agent (or his trustee in bankruptcy), by which the price may be set off against a debt owing by the agent to the purchaser, will bind the principal. See Hudsonv. Granger (1821) 5 B. & Aid. 27. See also Warner v. M'Kay (1836) 1 M. & W. 591. This set-off agreement would only be effective to the extent of the principal's indebtedness to the agent secured by the lien.

¹³ See Pearson v. Scott (1878) 9 Ch.D. 198; Crossley v. Magniac [1893] 1 Ch. 594; Blackburn v. Mason (1893) 68 L.T. 510; Anderson v. Sutherland (1897) 13 T.L.R. 163. See also Cooke & Sons v. Eshelby (1887) 12 App.Cas. 271, 280 with respect to the alleged custom. Note that there is a custom at Lloyd's by which a broker may set off the amount of a loss against his debt for premiums due to the underwriter. This method of payment will bind the insured if it can be shown that the broker was authorised to settle losses in accordance with the custom. See Stewart v. Aberdein (1838) 4 M. & W. 211, and generally Arnould's Law of Marine Insurance and Average (16th ed., 1981) Vol. 1, 124–127. Moreover if the principal, being indebted to the agent, has authorised the agent to pay himself out of the proceeds of the third party's indebtedness to the principal, the agent may receive payment by means of a set-off of a debt that he owes to the third party. See Barker v. Greenwood (1837) 2 Y. & C. Ex. 414. See also Pariente v. Lubrock (1856) 8 De G. M. & G. 5.

¹⁴ For a discussion of the situations in which the undisclosed principal doctrine applies, see Reynolds, “Practical Problems of the Undisclosed Principal Doctrine” (1983) 36 Current Legal Problems 119.CrossRefGoogle Scholar

¹⁵ See generally Goodhart and Hamson (1932) 4 C.L.J. 320, 345 etseq., criticising McCardie J. in Said v. Butt [1920] 3 K.B. 497,500. Compare though Glanville, Williams, “Mistake as to Party in the Law of Contract” (1945) 23 C.B.R. 380, 404.Google Scholar

¹⁶ Sir Frederick Pollock (1887) 3 L.Q.R. 358, 359.

¹⁷ See the discussion in Stoljar, , The Law of Agency (1961). 228–233Google Scholar. See also Bowstead, op. cit. 256–257; Fridman, , The Law of Agency (5th ed., 1983), 222.Google Scholar

¹⁸ Fridman, op. cit. 223. See also Bowstead, op. cit. 257.

¹⁹ Note that if the agent has a direct pecuniary interest in enforcing the contract, in the form of a “lien” over the proceeds for his charges and expenses, or for the balance of his general account with the principal, payment by the third party to the principal will not be a defence to a later action brought against him by the agent. See Robinson v. Rutter (1855) 4 El. & Bl. 954. If the third party is uncertain whether he should pay the principal, he should interplead. See Powell, . The Law of Agency (1952), 223 note 2Google Scholar. However it is suggested in Arnould, op. cit. Vol. 1, 134 para. 200 that payment of a loss by an underwriter to the assured without notice of a broker's lien will defeat the lien.

²⁰ Obviously any principal, whether disclosed or undisclosed, being sued by the third party may not set off a claim that he has against the agent. See Waring v. Favenck (1807) 1 Camp. 85; Kymer v. Suwercropp (1807) 1 Camp. 109. Nor could he bring into an account a claim that the agent has against the third party.

²¹ (1797) 7 T, R, 359.

²² The factor in George v. Clagett sold under a del credere commission, though, despite the reference to this in the headnote, it is not a prerequisite to the set-off. See Bolland B. in Warner v. M'Kay (1836) 1 M. & W. 591, 599 (arguendo), though compare Potter, Adams, and Dickson, , The Principles of the Law of Bankruptcy and Deeds of Arrangement (2nd ed., 1939), 274–275Google Scholar. Of course the question of a set-off, in the technical sense of that word, will only arise when the principal sues for the price. It should be distinguished from the situation in which the principal disputes the title of the purchaser to goods brought through the principal's agent on the ground that the agent exceeded his authority in selling in a particular manner, for example by setting off the price against a debt owing by the agent to the purchaser. See for example Lloyds & Scottish Finance Ltd. v. Williamson [1965] I W.L.R. 404; R. and E. Tingey & Co. Ltd. v. John Chambers & Co. Ltd. [1967] N.Z.L.R. 785.

²³ [1893] 2 Q.B. 350.

²⁴ Ibid. 355–356.

²⁵ This only appears from the report of the case at 69 L.T. 371.

²⁶ For other sub-agency cases involving a sale of goods, see New Zealand and Australian Land Co. v. Watson (1881) 7 Q. B. D. 374 and Knight v. Matson & Co. (1902) 22 N. Z. L. R. 293, though compare Kaltenbach, Fischer & Co. v. Lewis & Peat (1885) 10 App.Cas. 617, 626–627. Note however the possible limitations on t he right of the principal to sue t he sub-agent, discussed in Bowstead, op. cit. 104–108.

²⁷ (1871) L.R. 6 C. P. 610. See also Thornton v. Maynard (1875) L.R. 10 C.P. 695, 700; Montagu v. Forwood [1893] 2 O. B. 350, 354 per Lord Esher M.R. (and see also Bowen L.J. in t he report of the case at 69 L.T. 371, 373).

²⁸ See, e.g. Cooke & Sons v. Eshelby (1887) 12 App.Cas. 271, 280.

²⁹ Similarly it has been said that the bankruptcy provision cannot prevail against an assignee of a debt when the assignor has become bankrupt. See Lee & Chapman's Case (1885) 30 Ch.D. 216,225, and also De Mattos v. Sounders (1872) L.R. 7 C.P. 570.

³⁰ Kaltenbach v. Lewis (1885) 10 App.Cas. 617, 626–627 per Lord Watson.

³¹ The observation by Parke B. in Salter v. Purchell (1841) 1 Q.B. 209, 213–214, that the agent's debt “must be due either before the sale, or before notice to the defendant that plaintiff was the real owner” (emphasis added), should not be regarded as accurate. The requirement of existing debts at the time of notice also applies to a debtor's right to set off in an action brought against him by an assignee of his indebtedness a debt owing to him by the assignor. See for example Watson v. Mid Wales Railway Co. (1867) L.R. 2 C.P. 593.

³² (1885) 10 App.Cas. 617, discussed in Goodhart and Hamson (1934) 4 C.L.J. 320, 333–334.

³³ See Lord Watson at (1885) 10 App.Cas. 617, 626–627. In Kattenbach v. zLewis the third party's indebtedness arose after notice of the existence of an undisclosed principal, albeit as a result of a transaction entered into before notice, and the third party was denied a set-off. Cf. Rolher IronWorks Ltd. v. Canterbury Precision Engineers Ltd. [1974] 1 O B. 1, where the third party's indebtedness arose after notice of the appointment of a receiver, though as a result of a prior contract, and yet the third party was permitted a set-off against a pre-receivership indebtedness.

³⁴ (1871) L.R. 6 C.P. 610.

³⁵ Can v. Hinchliff (1825) 4 B. & C. 547; Fish v. Kempton (1849) 7 C.B. 687. Compare the situation in which an insurance broker, with a general lien for the balance of the insurance account, is allowed to exercise the lien over any insurance moneys received by him from the insurer after notice that the nominal insured was only an agent, on a policy held by him before notice. See Mann v. Forrester (1814) 4 Camp. 60, and generally Arnould, op. cit. Vol. 1,133–134 para. 200.

³⁶ See Moore v. Clementson (1809) 2 Camp. 22, as explained by Parke B. in Warner v. M'Kay (1836) 1 M. & W. 591, 596.

³⁷ See, e.g. Barries v. Imperial Ottoman Bank (1873) L.R. 9 C.P. 38; Sailer v. Purchell (1841) 1 O.B. 209, 213–214 per Parke B. (arguendo).

³⁸ Semenza v. Brinsley (1865) 18 C.B.(N.S.) 467; Maspons y Hermanov. Mildred, Goyeneche & Co. (1882) 9 Q. B. D. 530, affirmed (1883) 8 App. Cas. 874. See also Busby v. Maclurcan and Lane Ltd. (1930) 48 W.N. (N.S.W.) 2, 5.

³⁹ Baring v. Corrie (1818) 2 B. & Aid. 137, 144 per Abbott C.J.; Pratte v. Willey (1826) 2 Car. & P. 350. See also Pearsonv. Scott (879) 9 C h. D. 198, 202; Cooke & Sonsv. Eshelby (1887) 12 App.Cas. 271, 277–278; Montagu v. Forwood (1893) 2 Q. B. 350, 356per Kay L.J. In Knightv. Matson & Co. (1902) 22 N.Z.L.R. 293 both Stout C.J. and Edwards J. apparently were prepared to accept that there may be a duty of inquiry in some cases. For an analogous case concerned with a dormant partner, see Baker v. Gent (1892) 9 T. L. R. 159.

⁴⁰ Cooke & Sons v. Eshelby (1887) 12 App. Cas. 271. 278; Montagu v. Forwood [1893] 2 Q. B. 350, 355 per Bowen L.J.

⁴¹ Montagu v. Forwood [1893] 2 Q.B. 350, 355 per Lord Esher M.R. (emphasis added).

⁴² Knight v. Matson & Co. (1902) 22 N. Z. L. R. 293. 309 per Williams J. See also Fish v. Kempton (1848) 7 C. B. 687, 691–692, 693.

⁴³ See Manchester Trust v. Furness [1895] 2 Q.B. 539; Greerv. Downs Supply Co. [1927] 2 K.B. 28; Feuer Leather Corpn. v. Frank Johnstone & Sonse (1981) Com.L.R. 251. For this reason the opinion is expressed in Powell, op. cit. 148, and in Reynolds (1983) 36 Current Legal Problems 119, 122, that there is no duty of inquiry in these undisclosed principal set-off cases, though no mention was made of the cases suggesting that there may be a duty at common law.

⁴⁴ Baden, Delvaux and Lecuit v. Society General pour Favoriser le Developpement du Commerce et de L'lndustrie en France S.A. [1983] B.C.L.C. 325, 414 (emphasis added) (affirmed on other grounds [1985] B.C.L.C. 258, C.A.).

⁴⁵ See the classification of the various forms of knowledge accepted by Peter Gibson J. in Baden Delvaux [1983] B.C.L.C. 325, 407. It is noticeable that in Greer v. Downs Supply Co. [1927] 2 K.B. 28, in which the Court of Appeal said that the equitable doctrine of constructive notice should not apply to commercial transactions, the third party had actually queried the agent as to why the name of someone else appeared on the letter he received in response to his order, so that a common law duty of inquiry probably would have been satisfied.

⁴⁶ Of course the circumstances in which the agent contracted may be such as to indicate that he must have been acting only as an agent. Thus in Maanss v. Henderson (1801) 1 East 335 an English subject in time of war, acting for a neutral foreigner, opened a policy of insurance in his own name with a broker, and informed him that the property was neutral. This was held to be a sufficient indication to the broker that the party was acting as an agent and not on his own account.

⁴⁷ Pratt v. Wiljey (1826) 1 Car. & P. 350. Compare Creer v. Downs Supply Co. [1927] 2 K.B. 28, in which the third party did raise the matter with the agent.

⁴⁸ (1898) 14 T.L.R. 233.

⁴⁹ (1902) 22 N.Z.L.R. 293.

⁵⁰ See Boring v. Corrie (1818) 2 B. & Aid. 137. In cases such as Montagu v. Forwood [1893] 2 OB. 350, in which an agent is employed to collect a sum of money from a third party, the agent should have possession of any requisite documents.

⁵¹ Compare for example Cooke & Sons v. Eshelby (1887) 12 App.Cas. 271.

⁵² Semenza v. Brinsley (1865) 18 C.B.(N.S.) 467. 477. See also Borries v. Imperial Ottoman Bank (1873) L.R. 9 C.P. 38.

⁵³ (1826) 4 L.J.O.S.K.B. 203.

⁵⁴ (1809) 2 Camp. 22.

⁵⁵ “If the defendants had merely had a general knowledge of Green being a factor, this I think would not be enough to deprive them of the privilege they derived from his actually selling these goods as a principal. A man who is in the habit of selling the goods of others, may likewise sell goods of his own; and where he sells goods as a principal with the sanction of the real owner, the purchaser who is thus led to give him credit shall on no account afterwards be deprived of his setoff by the intervention of any third person.” (1809) 2 Camp. 22, 24 per Lord Ellenborough.

⁵⁶ (1826) 4 L.J.O.S.K.B. 203.

⁵⁷ See also Carrelt v. Bird (1872) 11 S.C.R. (N.S.W.) 97, a case concerned with the agent's standing to sue.

⁵⁸ (1863) 14 C.B.(N.S.) 574.

⁵⁹ Subsequently the Exchequer Chamber reversed the decision, though on the ground that the third party himself had acted through an agent who was aware of the identity of the real owner. This knowledge was imputed to the third party. However there is nothing in the report to indicate that the third party's own awareness that the other contracting party was in the habit of selling as a factor would have prevented a set-off. See Dresser v. Norwood (1864) 17 C.B.(N.S.) 466.

⁶⁰ (1818) 2 B. & Aid. 137.

⁶¹ w“They knew that Coles & Co. acted both as brokers and merchants, and if they meant to deal with them as merchants, and to derive a benefit from so dealing with them, they ought to have enquired whether in this transaction they acted as broker or not, but they make no enquiry.” (1818) 2 B. & Aid. 137, 144 per Abbott C.J.

⁶² (1878) 9 Ch.D. 198.

⁶³ Consequently it was held that the stockbroker was not discharged from liability to the principals for the amount of the deduction by his act of crediting the proceeds to his account with the solicitor.

⁶⁴ (1902) 22 N.Z.L.R. 293.

⁶⁵ Ibid. 315–317.

⁶⁶ See also Cooke & Sons v. Eshelby (1887) 12 App.Cas. 271; London Joint Stock Bank v. Simmons [1892] AC. 201, 229–230.

⁶⁷ As in Cooke & Sons v. Eshelby (1887) 12 App.Cas. 271.

⁶⁸ See Isberg v. Bowden (1853) 8 Ex. 852. 859; Dresser v. Norwood (1863) 14 C.B.(N.S.) 574, 588–589; Turner v. Thomas (1871) L.R. 6 C.P. 610. 613; Montgomerie v. United Kingdom Mutual Steamship Association Ltd. [1891] 1 Q. B. 370, 372. See also in this regard the early judgments in Rabone v. Williams (1785) 7 T.R. 360n and Stracey. Ross et at. v. Deey (1785) 7 T.R. 361n. The Privy Council in Browning v. Provincial Insurance Co. of Canada (1873) L.R. 5 P.C. 263. 272 said that “an undisclosed principal may sue and be sued upon mercantile contracts made by his agent in is own name, subject to any defences or equities which without notice may exist against the agent …”.

⁶⁹ Goodhart and Hamson, (1932) 4 C.L.J. 320.

⁷⁰ See Glanville Williams, “Mistake as to Party in the Law of Contract” (1945) 23 C.B.R. 380,408; Powell, op. cit. 138–139. Stoljar, op. cit. 232.

⁷¹ See Lampet's Case (1612) 10 Co.Rep. 46b. 48a.

⁷² (1887) 12 App.Cas. 271.

⁷³ Compare Reynolds, who has argued that this may have been a case of an unnamed, as opposed to an undisclosed, principal. See Reynolds (1983) 36 Current Legal Problems 119, 133 (though, as he concedes at p. 126, Cooke v. Eshelby has been treated as an undisclosed principal case).

⁷⁴ See also Montagu v. Forwood [1893] 2 O B. 350, 355 per Bowen L.J.; Cooper v. Strauss & Co. (1898) 14 T.L.R. 233; Farquharson Brothers & Co. v. King(1901) 70 L.J.K.B. 985, 987 per Vaughan Williams L.J. (arguendo); R. & E. Tingey & Co. Ltd. v. John Chambers & Co. Ltd.[1967] N.Z.L.R. 785. In Fish v. Kempton (1849) 7 C.B. 687. 691 Wilde C.J. had explained the set-off in terms savouring of estoppel, and see also the judgments in Baring v. Corrie (1818) 2 B. & Aid. 137.

⁷⁵ (1887) 12 App.Cas. 271, 278.

⁷⁶ “The ground upon which all these cases have been decided is that the agent has b e en permitted by the principal to hold himself out as the principal, and that the person dealing with the agent has believed that the agent was the principal, and has acted on that belief.” (1887) 12 App.Cas. 271, 275. Compare Lord Fitzgerald who expressed some doubt as to whether George v. Clagett does rest upon estoppel, though, as Spencer Bower and Turner, The Law Relating to Estoppel by Representation (3rd ed., 1977), 25 note, he then proceeded to state the proposition in terms of his own choosing which differed in no substantial respect from those in which estoppel by representation are usually expressed.

⁷⁷ The assertion in Bowstead, op. cit. 286, that Cooke v. Eshelby is consistent with this theory, is difficult to follow.

⁷⁸ Compare Pollock (1887) 3 L.Q.R. 358, 359, who doubted the wisdom of extending the anomalous rights of an undisclosed principal.

⁷⁹ The undisclosed principal, having been compelled to discharge the agent's indebtedness through the set-off, may be entitled to reimbursement by the agent (though it may be argued that the principal, by choosing to hide behind the agent, has officiously exposed himself to the liability to discharge the debt). Sec generally Goff, and Jones, , The Law of Restitution (2nd ed., 1978). 244Google Scholaret seq. If so, the effect of allowing the set-off would be to shift the risk from the third party to the principal of the agent not paying his debt.

⁸⁰ The evidence to the contrary referred to by Lord Fitzgerald in Cooke v. Eshelby (1887) 12 App.Cas. 271, 280 seems to have been based upon an alleged custom in the Liverpool Cotton Market, which was not proved, that the third party may set off the broker's indebtedness to him against any obligation to pay the price to an undisclosed principal, even when aware of the possibility of the existence of such a principal.

⁸¹ While the doctrine of apparent ownership also is said to be based upon an estoppel (see for example Mercantile Credit Co. Ltd. v. Hamblin (1965) 2 Q.B. 242. 271), the fact that it confers a real title, as opposed to operating merely between the parties themselves, has been said to militate against an estoppel, or at least against the traditional view that an estoppel does not establish a title. Compare Bowstead. op. cil. 289, 291 with Spencer Bower and Turner, op. cit. 17–18.

⁸² See Semenza v. Brinsley (1865) 18 C.B.(N.S.) 467, 477, and also Borries v. Imperial Ottoman Bank (1873) L.R. 9 C.P. 38.

⁸³ Rimmer v. Webster [1902] 2 Ch. 163, 169; Motor Credits (Hire Finance) Ltd. v. Pacific Motor Auctions Pty. Ltd. (1963) 109 C.L.R. 87, 99. Compare Lloyds & Scottish Finance Ltd. v. Williamson [1965] 1 W. L. R. 404, criticized, and possibly explained, in Bowstead, op. cit. 292, note 42; and see also Fridman, op. cit. 241–242.

⁸⁴ Bowstead, op. cit. 292.

⁸⁵ See for example Henderson & Co. v. Williams [1895] 1 Q.B. 521 (goods warehoused in another's name).

⁸⁶ Rimmer v. Webster [1902] 2 Ch. 163.

⁸⁷ Eastern Distributors Ltd. v. Goldring [1957] 2 Q.B. 600.

⁸⁸ See Spencer Bower and Turner, op. cit. 122. Note that if the contract specifically states that the agent is the principal, another person cannot contradict this by claiming to be an undisclosed principal so as to obtain a right to intervene on the contract and sue the other party. See Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] A.C. 847,864, and generally Powell, op.cit. 130–131.

⁸⁹ Compare the assertion by Goodhart and Hamson (1932) 4 C.L.J. 320, 344, that “normally a person contracting in his own name does not, by that mere fact, make any representation that he is not contracting as trustee for, or for the benefit of, another.” This proposition is based upon two cases, Nash v. Dix (1898) 78 L.T. 445 and Dyster v. Randall and Sons [1926] Ch. 932, though these may have been concerned with the materiality of the representation (as defined in Spencer Bower and Turner, The Law of Actionable Misrepresentation (3rd ed., 1974), 144), as opposed to whether there had been any representation. Lord Watson in Cooke v. Eshelby (1887) 12 App.Cas. 271, 278 apparently thought that the estoppel could be based either upon the principal's own conduct, or upon the authority, express or implied, conferred upon the agent.See also Borries v. Imperial Ottoman Bank (1873) L.R. 9 C.P. 38, 47, where Brett J. talked in terms of a representation made by the agent.

⁹⁰ The mere fact that the agent has been instructed not to reveal the name of the principal does not mean that he has been authorised to contract as though he is the principal. See Lord Fitzgerald in Cooke v. Eshelby (1887) 12 App.Cas. 271, 281–282.

⁹¹ E.g. Lord Halsbury L.C. in Cooke v. Eshelby (1887) 12 App.Cas. 271, 275 spoke of the “permission of the real principal to the agent to assume his character.” In Dresser v. Norwood (1863) 14 C.B.(N.S.) 574 the authority given to the agent to sell in his own name was emphasised. See also Fish v. Kempton (1849) 7 C.B. 687, 619 per Wilde C.J. (arguendo); Semenza v. Brinsley (1865) 18 C.B.(N.S.) 467, 477.

⁹² (1818) 2 B. & Aid. 137.

⁹³ For the distinction formerly drawn between brokers and factors, see Bowstead, op. cit. 13–14.

⁹⁴ (1876) 4 Ch.D. 133, explaining Semenza v. Brinsley (1865) 18 C.B.(N.S.) 467.

⁹⁵ (1902) 22 N.Z.L.R. 293.

⁹⁶ Of course the agent's failure to reveal his agency would not affect his authority to sell. This is clear from Dixon and Matson, and see also Stevens v. Biller (1883) 25 Ch.D. 31.

⁹⁷ See Powell, op. cit. 148–149, where curiously this point is made without reference to either Dixon or Matson.

⁹⁸ The facts of this case have already been set out supra.

⁹⁹ See Bowstead, op. cit. 292, citing Motor Credits (Hire Finance) Ltd. v. Pacific Motor Auctions Pry. Ltd. (1963) 109 C.L.R. 87, 99.

^{page 400 note 1} However Edwards J. in Matson (1902) 22 N.Z.L.R. 293, 315 did seem to regard Dixon as a case of apparent ownership.

^{page 400 note 2} See Bowstead, op. cit. 235.

^{page 400 note 3} “[Y]ou cannot rely on the apparent authority of an agent who did not profess in dealing with you to act as agent.” A. L. Underwood Lid. v. Bank of Liverpool and Martins [1924] 1 K.B.775, 792 per Scrutton L.J.

^{page 400 note 4} (1876) 4 Ch.D. 133.

^{page 400 note 5} Ibid. 137, referred to with approval by Williams J. in Matson (1902) 22 N.Z.L.R. 293, 308–309.

^{page 400 note 6} See also James L.J., who said that “As regards third parties, the powers of an agent are measured by the apparent scope of his authority, and cannot be limited by any private communication with him.” (1876) 4 Ch.D. 133, 136.

^{page 401 note 7} Brett J.A. in Dixon seemed to contemplate the situation in which the agent is a factor in the traditional sense of the word, so that his “usual employment” is to sell the goods of others in his own name. However Williams J. in Matson (1902) 22 N.Z.L.R. 293, 308–309, in applying Brett J.A.'s statement, obviously did not consider that it should be limited to that type of agent.

^{page 401 note 8} [1893] 1 Q.B. 346.

^{page 401 note 9} Ibid. 348–349.

^{page 401 note 10} See generally Bowstead, op. cit. 72–74, 257–259, and Fridman, op. cit. 62–64. The authority of Watuau v. Fenwick was doubted recently by Bingham J. in The “Rhodian River” [1984] 1 Lloyd's Rep. 373 (noted ante, p. 363 and [1984] J.B.L. 410)

^{page 402 note 11} (1887) 12 App.Cas. 271.

^{page 402 note 12} (1876) 4 Ch.D. 133.

^{page 402 note 13} The statement of the principle in terms of estoppel has been criticized in Powell, op. cil. 147–148, and also in Bowstcad, op. cit. 285–286.

^{page 402 note 14} See for example Slomker v. Southouse & Long Ltd. (1920) 20 S.R. (N.S.W.) 190. The fact that the agent may be on a del credere commission does not affect this conclusion. See Bramwell v. Spiller (1870) 21 L.T. 672. Nor would it make any difference if the agent himself had actually paid the contract sum to the principal under the terms of the commission. See T. P. Jordeson & Co. and Simon Kahn v. London Hardwood Co. Lid. (1913) 19 Com.Cas. 161; Coghlan v. McKay (1902) 8 A.L.R. 155. See also Flatau, Dick & Co. v. Keeping (1931) 39 Ll.L.Rep. 232 (advances made by the agent to his principal on the goods).

^{page 402 note 15} See generally Bowstead, op. cit. 401 el seq.

^{page 402 note 16} See Benton v. Campbell. Parker and Co. Ltd. [1925) 2 K.B. 410. 414.

^{page 402 note 17} See Drinkwater v. Goodwin (1775) 1 Cowp. 251.

^{page 402 note 18} See Williams v. Millington (1788) 1 H.B1. 81; Chelmsford Auctions Ltd. v. Poole (1973) 1 Q.B. 542. However apparently this is not so for an auctioneer of land. See Cherry v. Anderson (1876) Ir.R. 10 C.L. 204

^{page 403 note 19} Provincial Insurance Co. of Canada v. Leduc (1874) L.R. 6 P.C. 224, 244, and see generally Arnould, op. cit. Vol. 2, 1132 para. 1354.

^{page 403 note 20} Compare Atkyns and Batten v. Amber (1796) 2 Esp. 493, in which a set-off was denied, though the broker in that case had made advances to the principal on the goods sold so that he would have been suing on his own account. Quaere whether the agent in Atkyns in fact should have been allowed to sue in his own name. See Bramwell v. Spiller (1870) 21 L.T. 672. The sale note in Atkyns said that the goods were sold by the agent “on account of” the principal, so that the agent himself would not appear to have been a party to the contract. See for example T. P. Jordeson & Co. and Simon Kahn v. London Hardwood Co. Ltd. (1931) 19 Com.Cas. 161 (“as agents for”); Flalau, Dick & Co. v. Keeping (1931) 39 Ll.L.Rep. 232 (“sold for account of our principals”).

^{page 403 note 21} An auctioneer has only a particular lien over goods for his expenses and charges in respect of those particular goods. See Webb v. Smith (1885) 30 Ch.D. 192. This should be compared with a factor, who has a general lien for the balance of his account with the principal. Sec Kruger v.Wilcox (1755) Amb. 252; Baring v. Corrie (1818) 2 B. & Aid. 137, 148 per Holroyd J.

^{page 403 note 22} Holmes v. Tutton (1855) 5 El. & Bl. 65, 82; Manley & Sons Ltd. v. Berkett [1912] 2 K.B. 329. See also Bulgin v. McCabe (1859) unreported, but mentioned at 1 Q.S.C.R. 83–84; Grice v. Kenrick (1870) L.R. 5 Q.B. 340, 345; Benton v. Campbell, Parker & Co. Ltd. [1925] 2 K.B. 410, 416; Chelmsford Auctions Ltd. v. Poole [1973] 1 Q.B. 542, 549. Compare the unusual facts in Coppin v. Craig (1816) 7 Taunt. 243. The set-off has been said to be equitable in origin. See Manley & Sons Ltd. v. Berkett (at p. 333). See also Chelmsford Auctions Ltd. v. Poole (at p. 549). It has been justified on the ground that the auctioneer is merely suing for the principal. See Holmes v. Tutton (at p. 82). Manley & Sons Ltd. v. Berkett (at p. 333). See also Grice v. Kenrick (at p.345). Presumably a set-off would be denied if the auctioneer himself previously had tendered the sale price to the vendor, so that he would be suing on his own account (as in Chelmsford Auctions Ltd. v. Poole).

^{page 403 note 23} See Manley & Sons Ltd. v. Berkette [1912] 2 K.B. 329, 334.

^{page 403 note 24} See Re Cotton (deceased); Ex pane Cooke (1913) 108 L.T. 310.

^{page 404 note 25} Thus it has been said that “the demands must be mutual to the extent that they must be by and against a person in the same right.” See Shand v. M. J. Atkinson Ltd. (In Liquidation) [1966] N.Z.L.R. 551. 570 per McCarthy J. (emphasis added).

^{page 404 note 26} For a criticism of t he use of the word “lien” to describe the auctioneer's rights in relation to the proceeds of sale, see Bowstead. op. cit. 212. It is suggested in Bowstead that the auctioneer's lien over money may be explained instead as a right of set-off, though perhaps it is better described as a right of recoupment or payment, as opposed to a set-off which usually only operates as a procedural defence to an action.

^{page 404 note 27} In re Steel Wing Co. Ltd. [1921] 1 Ch. 349; Williams v. Atlantic Assurance Co. Ltd. [1933] 1 K.B. 81.

^{page 404 note 28} See Scott, The Law of Trusts (3rd ed., 1967) Vol. 1, 154–159. For example, unlike an assignor, a trustee of a chose in action is under a positive duty to enforce it. Moreover a trustee intending to purchase the interest of a beneficiary is bound to make a full disclosure of all facts known to him affecting the transaction, while an assignor is under no such duty. Certainly, if a voluntary settlement of property is intended to be effectual by an actual assignment, the courts will not give effect to it instead by finding a trust, and vice versa. See Turner L.J. in Milroy v. Lord (1862) 4 De G. F. & J. 264, 274.

^{page 404 note 29} For a somewhat analagous case concerned with goods in a warehouse, see Re London Wine Co. (Shippers) Ltd. (1976) 126 N.L.J. 977.

^{page 405 note 30} Obviously the agent as the contracting party is entitled to sue on that contract. See Garrett v. Bird (1872) 11 SCR. (N.S.W.) 97. See also Sims v. Bond (1833) 5 B. & Ad. 389. 393. and generally Bowstead. op. cil. 402.

^{page 405 note 31} See Allen v. E. O'Hearn & Co. [1937) A.C. 213. 218 (P.C.). followed and applied in Pople v. Evans [1969] 2 Ch. 255. Compare though Ames. “Undisclosed Principal—His Rights and Liabilities” (1909) 18 Y.L.J. 443, 446. 448. and Higgins. “The Equity of the Undisclosed Principal” (1965) 28 M.L.R. 167. While the agent is not considered to be a trustee for the principal vis-à-vis the third party, it may be that vis-à-vis the principal he is a trustee. See Pople v. Evans (at p. 261). This notion would seem to be an application of the maxim that equity acts in personam.

^{page 405 note 32} See Holmes v. Tutton (1855) 5 El. & Bl. 65. 82 with respect to auctions.

^{page 406 note 33} See Bowstead, op. cit. 355–356.

^{page 406 note 34} As in Short v. Spackman (1831) 2 B. & Ad. 962. See Fridman, op. cit. 217, though compare Stoljar, op. cit. 251 and Bowstead, op. cit. 401–402. Thus Diplock L.J. in Teheran-Europe Co. Ltd. v. 5. T. Belton (Tractors) Ltd. [1968] 2 Q.B. 545, 558 contemplated the situation in which both the principal and the agent may be entitled to sue, and be sued, on the contract.

^{page 406 note 35} Alternatively a set-off should be denied if the case is one in which the agent admittedly sues as a trustee for the principal. See Ch. 4, though compare the dictum of Denman C.J. in the early common law case of Gibson v. Winter (1833) 5 B. & Ad. 96, 102.

^{page 406 note 36} Certainly, if the undisclosed principal himself brought the action, the third party would not be allowed to set off the agent's debt in such a case. See the discussion of undisclosed principals, supra.

^{page 406 note 37} See supra.

^{page 406 note 38} See generally Bowstead, op. cit. 352 el seq.

^{page 406 note 39} See Nelson v. Roberts (1893) 69 L.T. 352, and Angas Parsons J. in R. v. Ray, Ex pane Chapman [1936] S.A.S.R. 241, 249 (liability of personal representative for costs).

^{page 408 note 40} Ex pane Clenell, Re Davies (1861) 9 W.R. 380, 4 L.T. 60. A similar principle applies when a joint liability is really only a security for a separate liability. See Ex pane Hanson (1811) 18 Ves.Jun. 232.

^{page 408 note 41} See the Marine Insurance Act 1906, s. 53(1).

^{page 408 note 42} See generally Arnould, op. cil. Vol. 1, 112–113. However, it appears that in non-marine insurance a broker is not principally liable for unpaid premiums (though an agent authorised to receive payment on behalf of an insurer will be liable to account for premiums actually received). See Re Palmdale Insurance Ltd. (in liquidation) [1982] V.R. 921.

^{page 408 note 43} The cases are collected and discussed in Arnould on the Law of Marine Insurance and Average (12th ed., 1939) Vol. 1, 163el seq.Google Scholar

^{page 408 note 44} See, e.g. Wilson v. Creighton (1782)3 Dougl. 132; Bell v. Auldjo (1784) 4 Dougl. 48. Aliter if the policy was effected by the broker on his own account. See Koster v. Eason (1813) 2 M. & S. 112 (though this is unlikely to be the case in modern business: see Arnould's Law of Marine Insurance and Average (16th ed., 1981) Vol. 1, 118 note 62).

^{page 408 note 45} The name inserted in the policy is “frequently—perhaps usually—that of the brokers acting on behalf of others.” The “Yasin” [1979) 2 Lloyd's Rep. 45, 53 per Lloyd J.

^{page 408 note 46} See Provincial Insurance Co. of Canada v. Leduc (1874) L.R. 6 P.C. 224, 244, and generally Arnould, op. cit. Vol. 2, 1132, para. 1354.

^{page 408 note 47} For a discussion of an insurance broker's lien, see Arnould, op. cit. Vol. 1, 129–134. No doubt this would encompass the common practice by which the broker, on receiving credit for a claim from the underwriter, pays the insured forthwith. See Arnould, op. cit. Vol. 1, 111, 116 note 56.

^{page 408 note 48} Koster v. Eason (1814) 2 M. & S. 112; Parker v. Beasley (1814) 2 M. & S. 423 (in which the brokers had a lien by virtue of their accepting bills on the credit of the goods insured); Davies v. Wilkinson (1828) 4 Bing. 573. Quaere whether the broker should have retained the policy in his possession so that he has a subsisting lien. See in this regard Peele v. Northcote (1817) 7 Taunt. 478, 485. Lord Ellenborough said in Koster v. Eason (at p. 118) that, because the policy had been taken out in the broker's name, the underwriter “had consented that they should be at liberty to stand in the character and situation of principals, that in case of loss they should beentitled to act in all respects as his creditors, and that they should be considered as giving him credit upon the policy at their own risk, and on their own account.” See also Parker v. Beasley (at p. 426). However, quaere whether the underwriter's consent should strictly be relevant, at least in a bankruptcy. The important point should be whether mutuality in fact is present. An agreement to confer a set-off where none is otherwise available would not be effective in a bankruptcy or a winding up. See British Eagle International Air Lines Ltd. v. Compagnie Nalionale Air France [1975] 1 W.L.R. 758. This being the case, the underwriter's “consent” that the other party should be considered as giving him credit should not add anything to the question whether the relationship of the parties in law is such that the set-off section should apply. The set-off in these cases is better explained on the ground that, because of his lien, the broker in any action would be suing on his own account, and not as trustee for the principal (see, e.g. Churchill & Sim v. Goddard [1937] 1 K.B. 92), and that therefore the demands are indeed mutual.

^{page 409 note 49} The fact that the broker may have exercised a lien over the policy and retained it in his possession would not deprive the insured of his right to sue on the policy for an indemnity. See Arnould, op. cit. Vol. 1, 134.

^{page 409 note 50} See Koster v. Eason (1813) 2 M. & S. 112; Xenos v. Wickham (1863) 14 C.B.(N.S.) 435, 465–466; Wilson v. Creighton (1782) 3 Dougl. 1323. See also dimming v. Forester (1813) 1 M. & S. 494 (set-off between solvent parties). Nor would it make any difference whether or not the broker acted on a del credere commission. See Peele v. Northcole (1817) 7 Taunt. 478. Lord Ellenborough said in Koster v. Eason (at pp. 118–119) that a set-off should not be allowed because the underwriter had not agreed, by giving policies in the insured's name, that the brokers should be considered as giving him credit. However, the relevance of this is questionable. See note 48, supra. The denial of a set-off is better explained on the ground suggested in the text. In non-marine insurance, brokers do not effect policies in their own names. Consequently the discussion infra of the broker's right to set off losses when the name inserted in the policy is that of the broker would not be relevant.

^{page 409 note 51} (1786) 1 T.R. 112. See also Bize v. Dickason (1786) 1 T.R. 285.

^{page 409 note 52} In fact the broker had paid the amount of the losses to the insured in accordance with the terms of his del credere commission after the underwriter's bankruptcy, but before the action was brought against him for unpaid premiums. However any right to a set-off had to be determined by the state of affairs existing as at the date of the bankruptcy, and the broker's subsequent conduct in paying the losses could not confer upon him a right of set-off when such a right had not previously existed. This same comment applies to Lee v. Bullen (1858) 27 L.J.O.B. 161, discussed in note 63, infra.

^{page 409 note 53} Ibid. 115. Lord Mansfield said that a del credere commission constitutes “an absolute engagement to the principal from the broker, and makes him liable in the first instance.” (1786) 1 T.R. 112, 115. However a del credere commission does not in fact make the agent primarily liable to the principal, but rather results in a secondary liability in the form of an agreement to indemnify the principal if the third party fails to pay through insolvency, or something that makes it impossible to recover as in the case of insolvency. See Thomas Gabriel & Sons v. Churchill & Sim [1914] 1 K.B. 449, affirmed [1914] 3 K.B. 1272, and generally Fridman, op. cit. 38–39.

^{page 410 note 54} See the discussion in the note to the report of Baker v. Langhorn (1816) 4 Camp. 396, 399. In Lee v. Bullen (1858) 27 L.J.Q.B. 161 the del credere commission was said to give the broker an “interest” in the contract of insurance. See also Tapper v. Matheson (1884) N.Z.L.R. 3 S.C. 312, 314.

^{page 410 note 55} Cumming v. Forester (1813) 1 M. & S. 494, 499; Koster v. Eason (1813) 2 M. & S. 112, 119; Hornby v. Lacy (1817) 6 M. & S. 166, 171 (though compare his earlier judgment in Wienholt v. Roberts (1811) 2 Camp. 586). See also Baker v. Langhorn (1816) 6 Taunt. 519, 521 per Gibbs C.J.;Peele v. Northcote (1817) 7 Taunt. 478, 480, 485 per Gibbs C.J.; Hornby v. Lacy (at p. 172 per Abbott C.J.). Quaere whether this is a satisfactory ground for criticism. For example, an assignment by A to B of a debt owing by C may provide B with a defence to an action brought against him by C on another transaction.

^{page 410 note 56} Cumming v. Forester (1813) 1 M. & S. 494, 499 per Lord Ellenborough. In Parker v. Smith (1812) 16 East 382, 385–386 his Lordship said that Grove v. Dubois was determined on the ground that there were “dealings virtually had with the assured themselves.” See also Arnould on the Law of Marine Insurance and Average (12th ed., 1939) Vol. 1, 164–165.

^{page 410 note 57} Though it is not entirely clear from the report of Grove v. Dubois (1816) 1 T.R. 112, which merely states that the foreign correspondents were “unknown” to the underwriter, this may have been a case in which the principal was undisclosed.

^{page 410 note 58} See Allen v. F. O'Hearn & Co. [1937] A. C. 213, 218, followed and applied in Pople v. Evans [1969] 2 Ch. 255.

^{page 411 note 59} However, a set-off would be understandable when the broker himself has a balance in his favour on his general insurance account with the insured, so that he would have a “lien” on the proceeds of any action brought by himself. There is no great injustice in allowing the broker a set-off to the extent of that interest.

^{page 411 note 60} (1816) 2 Marsh. 215, 6 Taunt, 519, 4 Camp. 396.

^{page 411 note 61} The House of Lords has since held that the right of set-off in bankruptcy may not be excluded by agreement between the parties. See National Westminster Bank Ltd. v. Halesowen Presswork & Assemblies Ltd. [1972] A.C. 785. It has also been held that neither waiver nor estoppel may produce this result. See Re Cushla Ltd. [1979] 3 All E.R. 415, 423, and also Re Paddington Town Hall Centre Ltd. (In Liquidation) (1979) 41 F.L.R. 239. Therefore, unless the recommendation in the Cork Committee Report (Cmnd. 8558, 1982), 305–306 that the parties indeed should be able to contract out of the operation of the set-off section is adopted, this ground for the decision would no longer be available.

^{page 411 note 62} (1816) 2 Marsh. 215, 216.

^{page 411 note 63} Compare Lee v. Bullen (1858) 27 L.J.O.B. 161. Brokers on a del credere commission had effected a policy in their own names “and/or as agents, as well in own name as for and in the name of any person to whom the same doth or may appertain.” Unlike in Baker v. Langhorn a set-off was allowed. The fact of the del credere commission was emphasised in the judgment, though the criticism directed at the earlier case of Grove v. Dubois (1786) 1 T.R. 112 in relation to its importance to a set-off should have been equally relevant here. The broker in Lee v. Bullen had contracted “and/or as agents,” rather than “as agents” as in Baker v. Langhorn. This may have been intended to mean that the persons taking out the policy may have been acting as agents, rather than that they necessarily were. If so the case would be similar to Grove v. Dubois. See also Greater Britain Insurance Corporation Ltd. v. C. T. Bowring & Co. (Insurance) Ltd. (1925) 22 Ll.L.Rep. 538, in which Greer J. also allowed brokers a set-off on policies effected by them “and/or as agents. ”His Lordship's decision subsequently was affirmed by the Court of Appeal, though on the alternative ground of an agreement modifying the relation of the parties. See (1925) 23 Ll.L.Rep. 285 (for the terms of the policy) and (1926) 24 Ll.L.Rep. 7.

^{page 411 note 64} (1816) 4 M. & S. 566.

^{page 412 note 65} At an earlier hearing of the case Bayley J. seemed to accept that the agent could have sued for the price himself. See (1813) 1 M. & S. 576, 581. The agent was on a del credere commission (and in fact had paid the contract sum to the principal, though after the purchaser had stopped payment). Nevertheless Lord Ellenborough said that the contract for the commission between the agent and the principal could not affect the question whether there may be a set-off between the agent and the third party.

^{page 412 note 66} Arnould's Law of Marine Insurance and Average (16th ed., 1981) Vol. 2,1132 para. 1354, citing Sunderland Marine Insurance Co. v. Kearney (1851) 16 Q.B. 925, and Browning v. Provincial Insurance Co. of Canada (1871) L.R. 5 P.C. 263. The insured may sue without producing the policy. See Arnould, op. cit. Vol. 1, 134.

^{page 412 note 67} See in this regard Arnould, op. cit. Vol. 1, 134.

^{page 412 note 68} It used to be the practice for returns of premiums to be dealt with under a system of mutual agency. The broker was considered to be the agent of the underwriter for the purpose of deducting returns from premiums which had been debited to the broker in his mutual account with the underwriter. Moreover, the broker was also the agent of the insured for the purpose of receiving returns of premium. However, either the insured or the underwriter could determine this agency. The insured could take the policy out of the hands of the broker, after settling his account with him, and deal instead through another broker. Similarly the underwriter could call upon the broker to pay the full premium at once, leaving nothing in reserve from which the broker could make a deduction in respect of any returns that were later found to be payable. The bankruptcy of the underwriter ipso facto would determine the broker's agency with him. Consequently, in a number of cases in which a broker was being sued by the underwriter's assignees in bankruptcy for premiums, the question whether or not the broker could set off returns of premium was decided by reference to the question whether the broker's agency had been determined before the right to returns had accrued. These cases are collected and discussed in Arnould on the Law of Marine Insurance and Average (12th ed., 1939) Vol. 1, 169–173, 174–175. However, as Arnould has explained, this practice is now extinct, and the cases discussed therein are no longer relevant to modern practice. Returns of premium are now dealt with as losses on the policy, and so any right of the broker to bring them into an account with his liability for premiums should be determined by reference to the same principles discussed supra with respect to the right to set off losses.

^{page 413 note 69} [1975] 1 N.S.W.L.R. 130. See also Re Palmdale Insurance Ltd. (in liquidation) [1982] V.R. 921.

^{page 413 note 70} In non-marine insurance a broker ordinarily is not principally liable for the premium (subject of course to agreement to the contrary), though an agent of the insurer authorised to receive premiums on behalf of the insurer will be liable to account for premiums actually received. See Re Palmdale Insurance Ltd. (in liquidation) [1982] V.R. 921 (and see also the subsequent proceedings in In re Palmdale Insurance (No. 2) [1983] 2 V.R. 430, in which it was held that the broker could not discharge the insured's liability for the premium by tendering to the insurer's liquidator the premium less a sum sufficient to pay the broker his commission. Rather the broker had to prove for his commission in the liquidation.) Compare, though, the custom at Lloyd's, which renders the broker principally liable. See MacGillivray & Parkington on Insurance Law (7th ed., 1981), 915–916 para. 2198, and also Grover and Grover Ltd. v. Mathews (1910) 15 Com.Cas. 249, 260 (Lloyd's fire policy). There is no authority establishing the existence of a similar custom in non-marine insurance in Australia. See Norwich Fire Insurance Society Ltd. v. Brennans (Horsham) Pty. Ltd. [1981] V.R. 981, 989, and also, in England, Wilson v. Avec Audio-Visual Equipment Ltd. [1974] 1 Lloyd's Rep. 81. In Colin Williams the broker's liability for premiums may have related to premiums actually received as agent for the insurer. See in this regard Norwich Winterthur Insurance (Australia) Ltd. v. Con-Stan Industries of Australia Pty. Ltd. [1981] 2 N.S.W.L.R. 879. Alternatively, a contractual liability for the premiums may have arisen from the process of accounting adopted by the parties (though note the comments made by Gobbo J. on this point in Palmdale Insurance [1982] V.R. 921). Certainly Helsham J. noted in his judgment (at p. 133) that an agreement drawn up to regulate the relationship between the broker and the insurer had never been executed.

^{page 413 note 71} Helsham J. accepted that there was a usage by which an insurer, upon cancelling a policy in respect of which a broker's commission had been paid, could claim a proportionate part of that commission. He further held that this usage was not unreasonable. See also Re Palmdale Insurance Ltd. (in liquidation) [1982] V.R. 921.

^{page 414 note 72} Helsham J. referred to similar cases in marine insurance in which it was held that a usage at Lloyd's, by which an underwriter could settle a loss by setting it off against a broker's liability for premiums, would not bind the insured, unless the insured had knowledge of the existence of this usage, or in any event the broker from the course of dealing between himself and the insured had authority to settle losses in accordance with it. See Sweeting v. Pearce (1859) 7 C.B.(N.S.) 449, (1861) 9 C.B.(N.S.) 534, and generally Amould's Law of Marine Insurance and Average (16th ed., 1981) Vol. 1, 125–127.