17.60 Consider the case of successive assignments. For example, A may assign a debt to B, who in turn assigns it to C. The debtor in that circumstance should be entitled to a set-off in respect of a cross-debt owing to him or her by C as the ultimate assignee. However, would C take subject to a set-off in respect of a debt owing to the debtor by the intermediate assignee, B? A similar issue arose in Re Milan Tramways Co, ex p Theys.282 The case concerned a number of debts for which proofs had been lodged in the liquidation of the debtor company. Subsequently, the creditors assigned the debts to H, who happened to be the (p. 843) subject of an allegation of misfeasance in relation to the company. H then assigned the debts to T, who gave notice of the assignment to the liquidator. After this second assignment an order was made that H should pay £2,000 to the company on account of his misfeasance. The Court of Appeal held that the liquidator could not set off that sum against the assigned debts under the insolvency set-off section, because at the date of the liquidation the debts were held by the original creditors, and there was no right of set-off at that date available against them.283 Alternatively, the liquidator argued that he could make a deduction from the dividend payable on the debts to the extent of H's obligation to contribute to the fund consisting of the company's assets available for distribution in the liquidation. Essentially, this was based on the principle considered in Cherry v Boultbee,284 although the case was not mentioned in the judgments. The argument to that effect also failed. The order against H for payment of the £2,000 was made after the assignment to the ultimate assignee, T, and before the dividend was declared. Fry LJ considered that the principle could not be invoked unless at the time the dividend was declared the entitlement to the dividend belonged to a person who was indebted to the company.285 It was not evidently regarded as sufficient that the liability arose out of conduct by H that occurred before the debts were assigned.286 Cotton LJ reached the same conclusion but expressed his reasoning in different terms. He said that T, in seeking payment of the dividend, was not enforcing the rights of H, but rather the rights of the original creditors, and there was no equity available against the original creditors to which T could be made to take subject.287 This was in the context of the Cherry v Boultbee principle, but the statement was expressed generally, in terms of ‘equities’, and it should be relevant also to set-off. If, in the Milan Tramways case, H had been an equitable assignee, it would have been a powerful argument.288 It is consistent with the later discussion by Dixon J in the High Court of Australia in Southern British National Trust Ltd v Pither,289 and it also accords with the view (p. 844) of Parker J in The Raven290 that: ‘The rule that an assignee takes subject to equities means, in my judgment, equities as against the assignor and does not include claims against an intermediate assignee.’291 It is true that, in Cavendish v Geaves,292 Sir John Romilly said that an ultimate assignee takes subject to rights of set-off available to the debtor against an intermediate assignee, and, in Pellas v Neptune Marine Insurance Co,293 Bramwell LJ expressed agreement with the principles laid out in Cavendish v Geaves. However, the views of Cotton LJ, Dixon J and Parker J are to be preferred. The point is that, in the case of an equitable assignment, the assignor has the legal title to the assigned debt. The reason that an equitable assignee takes subject to a set-off available against the assignor under the Statutes of Set-off is that there is mutuality at law, and therefore there is a right of set-off at law, and if the debtor's cross-claim against the assignor arose before the debtor had notice of the assignment there is nothing unconscionable in the debtor asserting this legal right of set-off against the assignee.294 On the other hand, when there are successive equitable assignments, and the debtor is owed a debt by the intermediate assignee, the position is different. There is no mutuality at law, given that the legal title to the debt being enforced is in the assignor whereas the debtor's claim is against the intermediate assignee, and there-fore there is no right of set-off at law. Nor would an equitable set-off be available by analogy with the Statutes,295 since the cross-demands are not equitably mutual. The beneficial title to the assigned debt is in the ultimate assignee, whereas the debtor's claim is against the intermediate assignee.
17.61 In the Milan Tramways case, however, it appears that H was not an equitable assignee, but had taken a statutory assignment of the debts in accordance with the Judicature Act 1873, s. 25(6),296 so that he had the legal title. In Cotton LJ's opinion, this did not make any difference, because: ‘there is nothing to prevent the ultimate assignee from suing in the name of the original creditors, free from any equities which only attach on the intermediate assignee.’297 Yet Lord Esher MR later commented in Read v Brown298 in relation to a statu-tory assignment, that: ‘The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him.’299 If, therefore, the assignment to the intermediate assignee complies with the statute and the ultimate assignee is an equitable (p. 845) assignee, the ultimate assignee would sue in respect of the intermediate assignee's legal title, which should have as a consequence that the ultimate assignee takes subject to equities available against the intermediate assignee that arose before the debtor had notice of the second assignment.300 It has been said that the statutory form of assignment relates only to procedure,301 but at least in relation to the rights of a sub-assignee it may have a substantive effect.
17.62 It may be that the intermediate assignee and the debtor entered into an agreement to set off the assigned debt against a debt owing by the intermediate assignee to the debtor. Provided that the agreement is entered into before the debtor has notice of the second assignment, it should bind the ultimate assignee, whether the first assignment was equitable or statutory.302 The agreement is equivalent to payment, and payment by the debtor to the intermediate assignee before notice of the second assignment would be effective to discharge the debtor as against the ultimate assignee.303
17.63 The ultimate assignee would take subject to equities available against the original assignor before notice. If the assignment to the intermediate assignee and the second assignment to the ultimate assignee were both merely equitable, the ultimate assignee would be enforcing the legal rights of the original assignor, and therefore the principle of taking subject to equities should apply in relation to the original assignee.304 If the original assignment complied with the statute, the intermediate assignee would take subject to any equity available against the original assignor,305 which in turn should constitute an equity available against the intermediate assignee to which the ultimate assignee takes subject, whether the ultimate assignment was statutory or equitable.