New South Wales Supreme Court CITATION : Rennie and Another v Remath Investment No 6 Pty [2002] NSWSC 672 FILE NUMBER(S) : SC 3696/00 HEARING DATE(S) : 13/06/02,14/06/02 JUDGMENT DATE : 30 July 2002 Kenneth John Rennie - 1st Plaintiff PARTIES : Jewelway Australia Pty Ltd (in liquidation) 2nd Plaintiff Remath Investment No 6 Pty (t/as John Fletcher International) - Defendant JUDGMENT OF : Gzell J COUNSEL : F Kunc for the Plaintiffs R J Weber SC for the Defendant SOLICITORS : Deacons Lawyers for the Plaintiffs Aitken McLachlan & Thorpe Solicitors for the Defendant CATCHWORDS : CONTRACTS - General contractual principles - Construction and Interpretation of Contracts - No contractual right of set-off - Running account - CORPORATIONS - Winding up - Statutory right of set-off - Principles of set-off in bankruptcy - Rights to credits of sales tax - Prospective rights to refunds of customs duty - Whether set-off can be waived or abandoned - Corporations Law (Cth) s 553C Corporations Law (Cth) Trade Practices Act 1974 (Cth) Bankruptcy Act 1966 (Cth) LEGISLATION CITED : Finance Directions (Cth) Sales Tax Assessment Act 1992 (Cth) Customs Act 1901 Customs Regulation 1926 (Cth) Forster v Wilson (1843) 12 M & W at 191 at 204 (152 ER 1165 at 1171 Gye v McIntyre (1990-1991) 171 CLR 609 at 618 GM & AM Pearce and Co Pty Ltd v R G M Australia Pty Ltd (1997) 26ACSR 639 Re Paddington Town Hall Centre Ltd (in liquidation) (1979) 41 FLR 239 CASES CITED : Richardson v The Commercial Banking Co of Sydney Ltd (1951-1952) 85 CLR 110 at 113 Queensland Bacon Pty Ltd v Rees (1965-1966) 115 CLR 266. Opal Maritime Agencies Pty Ltd v Baltic Shipping Co (1998) 158 ALR 416 National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 at 812-813 Re Cushla Ltd [1973] 3 All ER 415 McPherson: The Law of Company Liquidation, 4th ed (1999) at 559 DECISION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J TUESDAY 29 JULY 2002 3696/00 JOHN KENNETH RENNIE & ANOTHER v REMATH INVESTMENTS PTY LIMITED (t/as JOHN FLETCHER INTERNATIONAL) JUDGMENT 1 The first plaintiff is the liquidator of the second plaintiff. The second plaintiff imported jewellery. The defendant was its customs forwarding agent in Australia. Before the appointment of the first plaintiff as provisional liquidator on 24 July 1998, the defendant arranged the export back to the supplier of defective jewellery previously imported by the second plaintiff upon which customs duty and sales tax had been paid. After the appointment of the first plaintiff as liquidator on 21 August 1998, the defendant received refunds of customs duty and sales tax paid on the defective jewellery and set those receipts off against amounts due by the second plaintiff to it for its customs forwarding agency services. 2 The first plaintiff alleged a contract with the defendant to obtain the refunds upon payment of reasonable expenses. The defence alleged a contract appointing the defendant as customs broker in consideration of the payment of usual charges and the creation of a running account with a contractual right of set-off. By his reply, the first plaintiff alleged that any contract as alleged by the defendant was terminated upon the appointment of the first plaintiff or upon his notification of his appointment to the defendant. 3 The first plaintiff seeks payment to him of the customs duty and sales tax refunds under the Corporations Law (Cth), s 483, as money had and received, as damages for breach of fiduciary duty or, by a late amendment not opposed by the defendant, under the Trade Practices Act 1974 (Cth), s 82 for misleading or deceptive conduct contrary to s 52. The defence raised a contractual right of set-off or, alternatively, mutual dealings giving rise to a statutory right of set-off under the Corporations Law (Cth), s 553C. By his reply, the first plaintiff asserted estoppel. 4 The Corporations Law (Cth), s 553C(1) provides that where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company which is being wound up and a person who wants to have a debt or claim admitted against the company, an account is to be taken of what is due from one party to the other, the sum due from one party is to be set-off against any sum due from the other party and only the balance of the account is admissible to proof. The provision is the equivalent of the Bankruptcy Act 1966 (Cth), s 86(1). It was said by Parke B in Forster v Wilson (1843) 12 M & W 191 at 204 (152 ER 1165 at 1171) that the object of set-off in bankruptcy is: "to do substantial justice between the parties, where a debt is really due from the bankrupt to the debtor to his estate". This dicta was cited with approval by the High Court in Gye v McIntyre (1990-1991) 171 CLR 609 at 618, the High Court adding: "Where there are genuine mutual debts, credits or other dealings, it would be unjust if the trustee in bankruptcy could insist upon having 100 cents in the dollar upon the whole of the debt owed to the bankrupt but at the same time insist that the bankrupt's debtor must be satisfied with a dividend of some few cents in the dollar on the whole of the debt owed by the bankrupt to him. It was to prevent such injustice that the "mutual credits" and "mutual debts", and later "mutual dealings", provisions were introduced into bankruptcy legislation. The principles applicable to the interpretation of the Bankruptcy Act 1966 (Cth), s 86(1) apply equally to the Corporations Law (Cth), s 553C(1) ( GM & AM Pearce and Co Pty Ltd v RGM Australia Pty Ltd (1997) 26 ACSR 639). 5 In Gye at 622 it was said that the Bankruptcy Act 1966 (Cth), s 86 was a statutory directive which operated at the time the bankruptcy took effect. The provision was self-executing in the sense that its operation was automatic and not dependent upon the option of either party. The traditional and better view is that the statutory rule of set-off contained in s 86 will prevail over a contrary agreement of the parties. In Re Paddington Town hall Centre Ltd (in liquidation) (1979) 41 FLR 239, Needham J held that since it was impossible to contract out of the Bankruptcy Act 1966 (Cth), s 86 a creditor could not be estopped by its conduct from making a claim under it. 6 Mr Kunc who appeared for the plaintiff conceded, correctly in my opinion, that if I formed the view that the Corporations Law (Cth), s 553C applied, the issues raised on the pleadings with respect to estoppel, agreements precluding set-off and damages for misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth), s 52 could not defeat the statutory right of set-off. 7 At the centre of the dispute is the relationship which existed between the second plaintiff and the defendant when the first plaintiff was appointed provisional liquidator and the relationship which thereafter existed between the first plaintiff and the defendant. The defendant alleges that it had the right to get in the refunds and set them off against the then indebtedness of the second plaintiff to it and it merely perfected that right. The plaintiff alleges that any agreement which existed between the second plaintiff and the defendant did not contain a right of set-off and was supplanted by an agreement between the first plaintiff and the defendant that the defendant should collect the refunds on behalf of the first plaintiff in consideration of the payment of its reasonable expenses. 8 Stephen James Garner was the managing director of the defendant. He said that the business relationship between the second plaintiff and the defendant commenced in or around May 1996. On 14 June 1996 the second plaintiff signed a letter addressed to whom it might concern certifying that the defendant was its customs forwarding agent in Australia authorised to clear through customs all airfreight and seafreight consignments. 9 Stephen Thomas Davey was sales manager of the defendant. He said that from time to time he negotiated rates of charge to be made by the defendant against the second plaintiff. In February 1996, prior to the appointment of the defendant as customs forwarding agent, Mr Davey said that Sean Dries of the second plaintiff requested the defendant to send defective jewellery back to the United States of America and claim a refund of customs duty and sales tax. According to Mr Davey, Mr Dries said: "We are strapped for funds. I've been sent out here from Tucson with not much money to set this up and the overheads are enormous, and now I've got to send all these faulty goods back. Could you bank the refund cheques against what we owe you when they come in?" Mr Davey said that he instructed the credit controller of the defendant to bank any refund cheques against the account of the second plaintiff. 10 Mr Davey said that prior to the issue of the certificate of 14 June 1996, he had a conversation with Lynden Payne, the managing director of the second plaintiff, who enquired as to progress and was informed by Mr Davey as follows: "Well, we've got to send back all this faulty merchandise to America for credit and when we do, we will be able to get refunds back from customs on the duty and sales tax paid. When these refunds come in we are going to bank them against what you owe us." A refund was received by the defendant and credited to its bank account and set-off against the second plaintiff's indebtedness to it on about 26 June 1996. No other refunds were received by the defendant or by the second plaintiff prior to the appointment of the first plaintiff as provisional liquidator. 11 Mr Davey said that in about May 1997 Dennis Regimbal, who had become his point of contact at the second plaintiff, had the following conversation with him: "Regimbal: Steve, are you still banking the monies you are receiving from the refunds against what we owe you? Me: Yes, we are banking the money. Regimbal: Don't you think we should document it?" Me: OK." On 13 May 1997 Mr Davey responded to the conversation by presenting to Mr Regimbal an authority addressed to the Collector of Customs under the Finance Directions (Cth) requesting that until further notice in writing payment of refunds of customs duty and sales tax be paid to the defendant. The standing authority was signed by Mr Regimbal. 12 Mr Davey said that the last set of charges negotiated by him with Mr Dries was in 1997 and, for a refund, comprised $50 per refund, reimbursement of a customs charge of $45 per refund and a charge for time spent by employees of the defendant at $120 per hour. He said that storage fees at $2 per cubic metre per week were also agreed. 13 There is a paucity of evidence in relation to the relationship between the second plaintiff and the defendant. Contrary to the assertion that the business relationship between these parties commenced in about May 1996, there must have been remunerated services performed or in contemplation in February 1996 against which the prospective refunds were to be set-off. There was no reason for Mr Davey to instruct the credit controller as he did if this was not the case. The notion of set-off appears to have risen as a special arrangement in relation to the processing of one lot of returns of faulty jewellery. It does not appear to have been a term of the original retainer of the defendant in about February 1996. If it had been, there was no sense in the conversation between Mr Davey and Mr Dries and no need for Mr Davey's instruction to the credit controller. There does not appear to have been any such term agreed when the defendant was appointed the customs forwarding agent of the second plaintiff on 14 June 1996 and because of its absence from the terms of the initial retainer, the inference is that set-off was not a term of the arrangements put in place in June 1996. No occasion for any set-off, other than the special arrangement which culminated in the refund on about 26 June 1996, arose in the conduct of the relationship between the parties. Any variation of the contractual terms to import a right of set-off based upon the conversation between Messrs Davey and Regimbal is problematical because of the mutual mistake on the part of both that set-off was occurring with respect to the account between the parties. Furthermore, it seems an odd way to document an agreed set-off by proffering for signature a standard authority addressed the Collector of Customs. 14 The evidence establishes that the defendant conducted a running account for the second plaintiff. When jewellery was imported, the defendant paid customs duty and sales tax and debited these amounts together with its other charges to an account in the name of the second plaintiff. From time to time, the second plaintiff made payments in reduction, but not in clearance, of the account. 15 In Richardson v The Commercial Banking Co of Sydney Ltd (1951-1952) 85 CLR 110 at 133 the High Court described a running account with a grocer as involving partial payments in reduction of the debt in order to induce the shopkeeper to make further supplies of groceries. (See, also, Queensland Bacon Pty Ltd v Rees (1965-1966) 115 CLR 266). The inference on the material before me is that the second plaintiff made payments against its indebtedness to the defendant from time to time to induce the defendant to continue to provide its customs forwarding agency services. 16 I am not satisfied on the evidence before me that the relationship between the second plaintiff and the defendant extended beyond the provision of a running account. In particular, I am not satisfied that it was a term of the agreement between these parties at the time of the appointment of the first plaintiff as provisional liquidator, that cheques received under the standing authority could be set-off against any indebtedness of the second plaintiff. It was a feature of the defendant's business that it obtained standing authorities from its customers. I regard that, however, as a matter of administrative convenience. The alternative was an individual "order to pay agent" form authorising a payment to the defendant with respect to each refund application. 17 The defendant arranged for the export back to the United States of America of a large quantity of defective jewellery in the period from mid 1997 to early 1998. In the period from 19 June 1998 to 10 July 1998 the defendant lodged applications for refunds with the Collector of Customs. 18 On 15 July 1998 the second plaintiff ceased to trade. On the day of the appointment of the first plaintiff as provisional liquidator, the defendant paid to the Collector of Customs, application fees with respect to a further series of refund applications 19 On 27 July 1998, the first plaintiff sent a letter to each creditor, including the defendant, advising that he would not continue the second plaintiff's business. The letter stated that amounts owing to creditors on 24 July 1998 were unsecured debts and a form of proof of debt was attached. 20 A time limit for lodgement of three further refund applications was due to expire. The applications were lodged on 31 July 1998, on which date Mr Garner sent drafts of letters required for eight further refund applications for the signature of the first plaintiff. 21 On 4 August 1998 the defendant lodged a proof of debt representing the outstanding balance of the account of the second plaintiff in the sum of $81,127.70. 22 Errol Dogao was the clerk of the defendant in charge of processing the second plaintiff's import and refund applications. Tracy Ann Owers, an accountant working with the first plaintiff, spoke with Mr Dogao on 13 August 1998. The following exchange took place: "He said: JohnFletcher are the customs agents for JewelWay. We have collected sales tax refunds for them. We would be happy to pursue refunds owing to JewelWay for the liquidators. I said: That sounds acceptable – what do we need to do. He said: I will send you the paper work so that we can begin to collect those monies. I said: Excellent." 23 On 17 August 1998 further refund applications were lodged with the Collector of Customs. On 31 August 1998, as the result of the telephone conversation between Mr Dogao and Ms Owers and a further telephone conversation shortly before this date when Ms Owers asked Mr Dogao to confirm in writing the arrangement in place for the collection of the refunds by the defendant, Mr Garner sent the following facsimile to the first plaintiff: " RE: JEWELWAY AUSTRALIA PTY LTD I have been asked to advise you in writing that if, money is refunded by the Sales Tax Department, as requested in the 8 draft letters we supplied to Tracey on the 31st July 1998. I can confirm that the money will go to Ernst & Young, but it does not go directly to Ernst & Young. The money, if our application is successful, will be directly banked into our bank account. We will then remit the money to Ernst & Young after deducting the cash disbursements and our charges in accordance with our agreed rates with Jewelway on these applications." 24 Thereafter further applications for refund were lodged and much work was done in ascertaining the whereabouts of import files to match with export file for the purpose of the refund applications. 25 On or about 29 January 1999 the defendant received $24,215.91 in refunds from the Collector of Customs. On 8 February Mr Garner wrote to Ms Owers as follows: " RE: GOODS IN STORAGE. We are storing a large number of pallets for Jewelway. As this cargo is taking up space in our warehouse and there appears to be little chance that we will be paid for the storage on it we request permission to dispose of it. The cargo appears to us to have no commercial value. If you do not want us to dispose of the cargo we would like the storage accumulated while Ernst & Young have been the liquidators to be paid." Samples of the goods held in storage having being inspected, Matthew Paul Shaw, another accountant working with the first plaintiff, on the instructions of Ms Owers, informed Mr Garner that the goods in storage could be dumped. 26 On receipt of a letter of 9 February 1999 attaching 24 draft letters to the Commissioner of Taxation with respect to sales tax refunds, Mr Shaw had a discussion with Mr Dogao in which following exchange took place: "I said: We (meaning the liquidator) do not want to spend any more time on this as it is raking up fees. We aren't seeing any immediate results. When can we expect to receive a refund? He said: Within a month. It is still being processed. I said: Please forward the cheque to our office. I will provide you with a letter confirming the dates you have provided. He said: Okay." 27 Gary Pinge, another accountant working with the first plaintiff, said that from September to November 1998 he had numerous telephone conversations with Mr Dogao. Objection was taken to the admission of these conversations on the basis that Mr Dogao lacked authority to bind the defendant. No objection had been taken to other conversations with Mr Dogao set forth above. In examination in chief, Mr Garner said that it could have been one of Mr Dogao's responsibilities to negotiate a compromise of fees, but he would get parameters from Mr Garner first and Mr Dogao did not seek authority to do so. In cross-examination, Mr Garner said that it was part of Mr Dogao's responsibility when a customer inquired as to how its application was going, to give an answer to that question. I overrule the objection to pars 3,4 and 5 of Mr Pinge's affidavit. Mr Dogao, when Mr Pinge suggested that the defendant had no interest in the refund applications, responded that they had a lot of costs amounting at the rate of $40 or $50 per refund application. In the period from February to April 1999, when Mr Pinge asked Mr Dogao how the application was progressing, Mr Dogao said: "We're waiting for money to come back from the Customs Department. Once it is received, we will transfer the funds to you within four to six weeks." 28 Progressively, the defendant received further refunds from the Collector of Customs and the Australian Taxation Office. On 22 July 1999 Mr Garner sent a facsimile to Mr Pinge in the following terms: " RE: JEWELWAY REFUNDS As discussed this morning all the funds that can be claimed from the Customs Department have been claimed and have been collected by ourselves. Before their liquidation Jewelway lodged an Authority with the Commonwealth of Australia to pay all refunds to ourselves. The refunds being collected are refunds of money paid by ourselves. We do not believe that this Authority lapsed when Jewelway went into liquidation. The money we have collected is slightly less than the money we are owed by Jewelway. We intend to keep the money we have collected." Thereafter letters of demand and responses were exchanged and the proceedings in this court were commenced. 29 The parties have asked that I publish my reasons with respect to the entitlement or otherwise of the plaintiff and then allow the parties time, if necessary, to agree upon an appropriate amount. This course is eminently appropriate. 30 The essence of a running account is a payment to induce a supplier to continue to make supplies of goods or services. At the latest, the defendant was aware that it would no longer be induced to provide its services on this basis when it received the letter of 27 July 1998 from the first plaintiff. The defendant appears to have acknowledged this situation by its lodgement on 4 August 1998 of a proof of debt for the balance due on the account. 31 A new arrangement came into existence in August 1998. It was constituted by the conversation between Mr Dogao and Ms Owers of 13 August 1998 followed by the facsimile from Mr Garner to the first plaintiff of 31 August 1998 written in consequence of the earlier conversation. The terms of the arrangement were that the defendant would claim refunds of customs duty and sales tax due to the second plaintiff in consideration of the payment of charges at rates agreed with the second plaintiff. 32 Mr Garner said that he intended by the letter of 31 August 1998 that the agreed rates of charge should encompass the amount outstanding on the second plaintiff's account. I do not accept that the letter bears such a construction. It was certainly not interpreted that way by the first plaintiff and his staff. Had that arrangement been spelt out to the first plaintiff and his staff, it would never have been the subject of agreement because payment of the outstanding balance due by the second plaintiff to the defendant would have constituted an unfair preference in terms of the Corporations Law (Cth), s 588FA(1). In my view the letter constituted an offer to get in the refunds in consideration of payment in accordance with the rates agreed between Mr Dogao and Mr Dries applied to the services rendered by the defendant in obtaining the refunds and did not incorporate the balance outstanding upon the account between the defendant and the second plaintiff. 33 A final invoice was rendered by the defendant with respect to refund applications in the sum of $10,678.70. Apart from sundry cash expenses, the fee was made up of reimbursement of $45 per refund application paid to the Collector of Customs, $50 per refund application and recovery of the time spent by Mr Dogao at $120 per hour in accordance with Mr Davey's evidence of Mr Dries' agreement to these rates. Mr Kunc conceded, and in my view correctly so, that $10,678.70 was due by the first plaintiff to the defendant as part of the expenses of realising or getting in the property of the second plaintiff in terms of the Corporations Law (Cth), s 556(1)(a). 34 A claim was made by the defendant for storage expenses from July 1998 until disposal of the stock in February 1999 of $8,252.93 at the rate of $2 per cubic metre per week agreed between Mr Davey and Mr Dries. It was submitted that the letter of 8 February 1999 from Mr Garner to Ms Owers amounted to an offer by the defendant to release the first plaintiff from storage charges if permission was granted to dispose of the stock. I do not read the letter in that fashion. I do not regard it as an offer to release the liability but merely as a statement of the likelihood that payment would not be made. In my view the defendant is entitled to the storage fee. 35 The defendant also rendered an invoice for $1,035.12 as the cost of disposal of the stock. There was no charge agreed between the first plaintiff's staff and the defendant with respect to the disposal of the stock but, in my view, the defendant is entitled to a reasonable charge in respect thereof. 36 I have not considered the operation of the Corporations Law (Cth), s 553C because of my finding that there were no mutual dealings between the parties when the first plaintiff was appointed provisional liquidator and because of my finding that the defendant agreed to recover the refunds for the first plaintiff in consideration of the payment of the current agreed rates of charge for its work in that regard. 37 It was submitted on behalf of the first plaintiff that if the Corporations Law (Cth), s 553C operated, the right to the refund of customs duty and sales tax did not arise until after the appointment of the first plaintiff as provisional liquidator when all documents associated with the claims to refund were lodged and s 553C, therefore, had no operation. Reliance was placed on Opal Maritime Agencies Pty Ltd v Baltic Shipping Co (1998) 158 ALR 416. That case, however, involved the continued trading of the provisional liquidator. It was held that moneys owing under an agency agreement could not be set-off against freight earned by the provisional liquidator. That is a different situation from the instant circumstances. 38 In supplementary submissions by the parties with respect to the status of the documentation for the first refund applications, it was submitted on behalf of the first plaintiff that it should be inferred that all import files necessary for the lodgement of relevant documentation were provided by the first plaintiff. To the contrary were the submissions by Mr Weber SC who appeared for the defendant. In his submission, the first batch of refunds had already been lodged with the Collector of Customs prior to the appointment of the first plaintiff as provisional liquidator. 39 It is unnecessary for me to resolve this issue because of the view I take as to the entitlement to the refunds. The Sales Tax Assessment Act 1992 (Cth), s 51(1) provided that Tables 3 and 3A set out the situations in which a claimant was entitled to a credit of sales tax. Table 3A was irrelevant. Item CR 11 in Table 3 in Sch 1 provided for a credit of the tax borne on goods on which the claimant had borne tax which had been exported by the claimant while still "assessable goods". That term was defined in s 5 to mean Australian goods or imported goods not including "Australian- used goods". That term was defined, relevantly for the present purposes, in the same provision to mean goods that had been applied to a person's own use in Australia. Since the defective jewellery had not been the subject of an application to own use, the return of the jewellery to the United States of America gave rise to an entitlement to a credit in the second plaintiff. Table 3 stated that the time the credit arose was the time of export. The evidence establishes that export preceded the appointment of the first plaintiff as provisional liquidator. It follows, in my view, that when the first plaintiff was appointed the provisional liquidator, the second plaintiff already had a right to refunds of sales tax with respect to the exported defective jewellery. 40 The refunds of customs duty were claimed under the Customs Act 1901 (Cth), s 163(1) which provided that refunds of duty might be made in respect of goods generally or in respect of goods included in a class and in such a circumstances and subject to such conditions and restrictions as were prescribed. The relevant prescription was contained in the Customs Regulations 1926 (Cth), reg 126(1)(h) which provided that it was a prescribed circumstance for the purposes of s 163 if the Collector was satisfied that the customs value of goods had been determined, a decrease in the value of the goods that would have resulted in a decrease in the customs value occurred before the determination because of a fault or defect in the goods, the decrease in value was not taken into account in determining the customs value, all reasonable steps available to the importer had been taken to obtain redress from the manufacturer or supplier but without success and no rebate or other decrease in the price of the goods accrued to the importer. It follows that the right to refund of customs duty did not arise until the Collector of Customs was satisfied with the above circumstances. 41 However, in Gye at 623, the High Court said of the introduction of the words "other mutual dealings" in the Bankruptcy Act (Cth), s 86: "The introduction of the reference to "other mutual dealings" in bankruptcy set-off provisions such as s 86 was intended both to give a more extended right of set-off and to ensure that the intended scope of such provisions was not frustrated by a narrow or technical approach to what constituted "credits" or "debts": see Peat v Jones (1881) 8 QBD 149 at 150. The phrase "or other mutual dealings" (emphasis added) does, however, give rise to a linguistic problem in that "credits" and "debts" will ordinarily represent the outcome of dealings rather than the dealings themselves. Conversely, "dealings" commonly do not, of themselves as distinct from their outcome, represent credits or debts susceptible of direct set-off. That being so, s 86 necessarily speaks of a set-off of what is due " in respect of those mutual dealings"(emphasis added). In that context, the requirement of mutuality in respect of "other…dealings", as distinct from, "credits" or "debts" susceptible of immediate set-off, is directed not so much to the relationship between the dealings as such but to the relationship between the claims which have arisen from them. There will, for the purposes of s 86, be mutual dealings at the date of the sequestration order if there existed at that date "dealings" which involve the bankrupt and the other party and which were capable of giving rise to, and subsequently did give rise to, "mutual" claims between them in the sense in which the word "mutual" is used in s 86." 42 If, contrary to my view, there were mutual dealings between the second plaintiff and the defendant, there existed on the day the first plaintiff was appointed provisional liquidator such dealings, which were capable of giving rise to mutual claims between them the one arising from the present entitlement to a credit of sales tax, the other arising from the subsequent entitlement to a refund of customs duty, such claims giving rise to a self-executing set-off which could not be avoided by the subsequent conduct of the parties. 43 If I were free to do so, I would follow the dissenting judgment of Lord Cross of Chelsea in National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785 at 812-813 and conclude that the defendant, as the party benefited by the set-off, was free to waive the benefit and did so by its subsequent conduct of lodging the proof of debt and entering into the subsequent agreement with the first plaintiff to gather the refunds on payment of current rates for work done in that regard. However, while the question may have been left open in Gye at 622, McPherson: The Law of Company Liquidation, 4th ed (1999) at 559 states that the proposition set out in par 42 above is plainly the prevailing view. In Re Cushla Ltd [1973] 3 All ER 415, Vinelott J took the view that the set-off cannot be waived or renounced by the creditor of a bankrupt in reliance upon the majority in National Westminster Bank. I regard myself as similarly constrained. 44 I find that the first plaintiff is entitled to the moneys recovered by the defendant by way of refund of customs duty and credit of sales tax. I find that the defendant is entitled to priority of payment in the liquidation of the second plaintiff for the agreed sum of $10,678.70, the claims to storage at $2 per cubic metre per week and the reasonable costs of disposing of the stored jewellery. I will hear the parties on the forms of order that should be made and the claims to interest and costs. 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