The debtor had agreed to buy a company from the petitioner, the price to be payable in instalments by means of post-dated cheques. The debtor alleged misrepresentation and stopped one of the cheques. The petitioner served a statutory demand based on the dishonoured cheque. The district judge dismissed the debtor’s application to set aside the statutory demand, concluding that although the debtor had an arguable claim for damages for misrepresentation such a claim could not amount to a defence to a claim on the dishonoured cheque, and that in consequence it could not provide a ground for setting aside the statutory demand. The debtor appealed.
Held: The appeal failed. the misrepresentation claim did not disclose a genuine triable issue. The claim of set-off could however be made in principle since this would accord with companies court practice.
Neuberger J discussed the meaning of the expression ‘counterclaim, set-off or cross demand’ in the Rule: ‘Fastening upon the words ‘counterclaim, set-off or cross demand’ in r.6.5(4)(a) [counsel for the debtor] contends that although a counterclaim of the sort contemplated in [the debtor’s] evidence could not avail her as a defence against a claim by [the petitioner] for judgment on the cheque, it does provide a basis for setting aside the statutory demand.
In my judgment that argument is correct. First, the difference between set-off on the one hand, and a cross-demand or counterclaim, on the other hand, is as follows.
A set-off is a claim which can be, as its name suggests, set off against another claim, i.e. in practice it operates as a defence to that other claim. On the other hand a counterclaim or cross-demand which is not a set-off is a claim or demand which, although perfectly valid in itself, cannot for some reason be invoked as a set-off or defence to another claim. In my judgment, the way in which the three words are used in r.6.5(4)(a) is such that they have that effect in the context of the rule.
Secondly, it is difficult to give the reference to counterclaim or cross-demand any sensible alternative meaning. If they are limited to counterclaims or cross-demands which act as set-offs there would have been no reason to refer to them. They would have been covered by the simple word ‘set-off’.
Thirdly, some support for this view is to be found in [paragraphs 3 and 4 of the 1987 Practice Direction, which were in identical terms to paragraphs 12.3 and 12.4 of the 1999 Practice Direction].’
Judges:
Neuberger J
Citations:
Gazette 31-Mar-1999, [1999] 2 BCLC 336
Statutes:
Insolvency Rules 1986 6.5(4)(a)
Jurisdiction:
England and Wales
Cited by:
Cited – Bryce Ashworth v Newnote Ltd CA 27-Jul-2007
The appellant challenged a refusal to set aside a statutory demand, in respect of his director’s loan account with the respondent company, saying the court should have accepted other accounts to set off against that debt.
Held: A statutory . .
Cited – Ezekiel and Another v Kohali and Another CA 30-Jan-2009
Each side sought specific performance of a contract set out in a Heads of Agreement document, but one sought an abatement in the price, saying that the seller was unable to deliver the title promised. The seller replied that the document did not . .
Lists of cited by and citing cases may be incomplete.
Insolvency
Updated: 06 August 2022; Ref: scu.81424