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TMI Blog1969 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... dant was a director of the company. The plaintiff company sues for a sum of money, some 5,000, as on an account stated, the basis of the claim being that the defendant as director of the company signed a statement of affairs which disclosed that amount as being owing by him to the company. The defendant in his pleading denies that he is indebted to the company. He raises questions about the acceptability of the statement of affairs as an account stated in the circumstances of this case. In paragraph 5 of his defence he does not admit the accuracy of the alleged account and goes on to say : "If and insofar as the defendant is indebted to the plaintiffs for the sum alleged or any sum the defendant will claim to set off against the same those sums due and owing to the defendant by the plaintiffs at the date of the commencement of the winding-up of the plaintiffs, namely, 15,086 11s. 11d., full particulars of which exceed three folios. " There is a general denial in paragraph 6. Then, the counterclaim starts at paragraph 7. In that paragraph, the defendant repeats his defence, particularly paragraph 5, and continues, in paragraph 8 : "In the premises the defendant is entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the amount due to him so that he may prove for that amount in the liquidation. It is clear from the argument that underlying this dispute is some questions under the Statute of Limitations into which this court has not been required to go. I say no more about it, save to indicate that there may well be some advantage under that Act if the defendant can succeed in having his claim assessed in the present suit. The argument of the plaintiff company can be put very briefly. Mr. Rawlins points to section 231 and, while he recognises that there may be some difference in the authorities as to whether a counterclaim is itself a separate action or merely proceedings which have to be treated for certain purposes as a separate action, yet he contends that, on any view, a counterclaim is a "proceeding". He has drawn our attention to authority which suggests that the words in this phrase in section 231 should be given a wide meaning. I refer to the most recent case, Eastern Holdings Establishment of Vaduz v. Singer Friedlander Ltd. [1967] 1 WLR 1017. This was a judgment of Buckley J. dealing with an interpleader proceeding and the effect of section 231 upon that proceeding. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on proving or claiming to prove a debt under the 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; .................." For the purposes of company winding-up, one can now read that section as though the reference were to a liquidation and not to a bankruptcy. Mr. Head's argument is that section 31 does not merely prescribe a code of procedure in the bankruptcy or winding-up, as the case may be, but gives the parties concerned a right which they can enforce and which must be recognised in any court where issues of this kind arise. Accordingly, he says that, in the present proceedings, he is entitled under section 31 to have an account taken as of right, and that, when the account has been taken, the amount shown to be due to him (if it so proves to be) is an amount which he can prove in the winding-up. The effect of this argument, of course, would be that this court would be required to recognise the equity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclude the plaintiff's claim, but I find no word in it to suggest that the counterclaim can be proceeded on as a counterclaim, that is to say, so as to give the defendant some right beyond the right of defence to the claim. The next case is again a decision of this court following in the next year : Mersey Steel and Iron Co. v. Naylor. [1882] 9 QBD 648. This case is an important authority on other matters, and the point with which the court is presently concerned was a secondary issue. Here, again, there was a contract for the sale and delivery of goods by instalments. Here, the vendor was a company which went into liquidation before all the instalments had been completed. The company then sued for the amount of the instalments delivered, and were met by a counterclaim of greater amount for damages for failure to deliver. It is quite clear, and Mr. Head rightly stresses this, that the form of pleading in this case was that the defendant was counterclaiming for a greater sum by way of damages arising out of the contract. At an early point in the argument, at page 652, reference was made to the difficulty of pursuing a counterclaim in those circumstances without the leave of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the Court of Bankruptcy or not, there shall be no claim except for the balance. This has been termed, I think, in one of these cases, the equity of the statute. That being the law, the mode of carrying it out is an accident. If when there are cross demands between the bankrupt and another party the assignee brings an action, we should allow the other party the same benefit as he would have obtained if he had come in to establish his claim in the Court of Bankruptcy. According to Peat v. Jones 8 QBD 147 , where you see that the statute enacts that in the case of winding-up there is to be a particular mode of taking an account between the parties, and if the balance is one way the creditor shall prove in the winding-up, and that if it is the other way the liquidator shall be entitled only to claim the difference, the same mode of taking the account ought to apply to a different form of procedure whether in the Court of Bankruptcy or in the High Court. Then Order XIX, rule 3, comes in, and shows how the point is to be taken, viz., by counterclaim. " Mr. Head very properly says (if I may pause there) that that passage is entirely in his favour. It supports the view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount being taken so that an assessment of the figures is reached, and, if, for any special reason, full account is not taken, because, for example, it becomes apparent early on that the cross-demand substantially overtops the claim, then I see no particular objection on the ground of costs to allowing the further dispute as to the totality of the cross-demand to be settled on proof in the Companies Court in the ordinary way. Indeed, it seems to me it would be quite wrong for us to assume that in general there would be a great saving of time and expense by adopting Mr. Head's contention, and I think that the proper course to deal with the exceptional case where the argument may be right is by means of an application for leave to the Companies Court under the terms of section 231. For all those reasons I have come to the conclusion that the judge's order was right, and I would refuse these applications for leave. Davies, LJ. I entirely agree and would make but two very minor additions to what my Lord has said. The first is this. If one looks at the report in the House of Lords in Mersey Steel and Iron Co. Ltd. v. Naylor [1884] 9 App. Cas 434 , one sees, at page 435, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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