Langley Constructions (Brixham) Ltd v Wells
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WIDGERY,LORD JUSTICE DAVIES |
| Judgment Date | 05 February 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0205-2 |
| Docket Number | 1966 L. No. 279 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 February 1969 |
[1969] EWCA Civ J0205-2
Lord Justice Davies and
Lord Justice Widgery
In The Supreme Court of Judicature
Court of Appeal
(On appeal from Mr. Justice Ashworth in Chambers)
MR. ADRIAN HEAD (instructed by Messrs. Bridges, Sawtell & A. J. Adams, Agents for Messrs. Langdon & Co., Torquay) appeared on behalf of the Applicant (Defendant).
MR. C. S. RAWLINS (instructed by Messrs. Sargent & Probert, Exeter) appeared on behalf of the Respondents (Plaintiffs).
JUDGMENT ON ORIGINAL MOTIONS FOR LEAVE TO APPEAL
( As revised)
Lord Justice Widgery will give the first judgment.
These are two applications, made by the Defendant in each of the two relevant actions, for leave to appeal against orders of Mr. Justice Ashworth in Chambers whereby the learned Judge ordered that the Counterclaim in each case be struck out for non-compliance with Section 231 of the Companies Act, 1948, which I should read: "When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court may impose". There are two actions and two applications, but since each raises precisely the same issue as the other I can deal with the case of Langley Constructions v. Wells alone.
In this case the Plaintiff company is in liquidation, the winding-up order having been made in 1962, and the Defendant 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 that 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 in so far 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 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 he repeats his Defence.particularly paragraph 5, and continues in paragraph 8: "In the premises the Defendant is entitled to have the said account reopened and upon the basis thereof an account by the Plaintiffs of all sums received by the Plaintiffs from or paid on their behalf by the Defendant and to credit for the same after allowing for any sums which may be due from the Defendant to the Plaintiffs". In paragraph 9 he says: "The Plaintiff company being in liquidation the Defendant admits that he cannot during the liquidation claim payment in full of sums found due to him or the balance thereof but avers that he is entitled to a declaration that he is entitled to prove in the liquidation for such balance as may be found due to him". Then the Defendant counterclaims for the taking of an account and for a declaration that he is entitled to prove in the liquidation of the Plaintiffs for dividend as an unsecured creditor in respect of any balance which may be found to be due to him.
The purpose of section 231 is clear and has not been challenged in argument. It is, in my judgment, to ensure that when a company goes into liquidation the assets of the company are administered in an orderly fashion for the benefit of all the creditors and that particular creditors should not be able to obtain an advantage by bringing proceedings against the company. What is contemplated is that the Companies Court shall be seized of all these matters and shall se that the affairs are wound up in a dignified and orderly way.
It is not disputed, and never has been disputed, that the Defendant is entitled to use his cross-demand by way of set-off to reduce or extinguish the company's claim in the present action. The Plaintiff company's argument is that that is as far as he can go and that, if and so far as he wished to claim in respect of an amount whereby his cross-demand over-tops the claim, he must do it by proof in the liquidation in the ordinary way.
The Defendant's concern, as appears from his pleading,is that in these proceedings there shall be ascertained the amount (if any) whereby his cross-demand exceeds the claim and that he shall, in the terms of his pleading, obtain a declaration that he is entitled to prove in the liquidation for such balance. Mr. Head for the Defendant, in the course of the argument, has indicated that the declaration is not vital but I am satisfied that, by one means or another, what he seeks to achieve is a determination in the present proceedings of the amount due to him so that be may prove for that amount in the liquidation.
It is clear from the argument that underlying this dispute is some question under the Statute of Limitations which this Court has not been required to go into. I say no more about it, save to indicate that there may well be some advantage under those Statutes 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 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 Limited, which is reported in 1967 2 All England Reports at page 1192. This is a judgment of Mr. Justice Buckley dealing with an interpleader proceedings and the effect of section 231 upon that proceeding. At the top of page 1194 he quotes certain words from Sir George Jessel, Master of the Rolls, in Re International Pulp and Paper Company Limited, a decision in 1876. The words of Sir George Jessel are: "The words are general - 'action, suit, or other proceeding'. Why should I limit them? Thosewho say that I am to impose a limit upon those general words must show a reason for my so doing". Mr. Justice Buckley takes up the same point at the bottom of page 1195 where he says "the considerations which arise in this case do lead me to think that section 231 ought to be construed widely, and sufficiently widely to embrace an interpleader summons".
Accordingly, says Mr. Rawlins, this case is really a very simple one: the terms of the section require that leave should be obtained before this counterclaim be pleaded and since it is agreed no leave was obtained, Mr. Rawlins would say that is an end of the matter.
Mr. Head for the Defendant first submits that a counterclaim (or perhaps I should say this counterclaim) is not within the terms of section 231. He will not, I hope, think I am in any sense disrespectful to his argument if I do not attempt to develop this point in any detail, because in substance that is what it amounted to. Apart from commenting upon the phraseology of the section itself he has also referred us to authority which suggests that claim and counterclaim are in truth a single proceeding, and he says that if in this case claim and counterclaim are to be treated as a single proceeding then it would not be right to regard that proceeding as against the company but rather as a proceeding brought by the company. Such a result, in my judgment, would be so unreal as to make the Court anxious not to adopt it. I cannot find it possible to say that the words of section 231, given their literal and ordinary meaning, have any other effect than to require leave to be obtained before this counterclaim is made.
Mr. Head's real argument is not on the words of section 231 but on a very different principle. He relies on section 31 of the Bankruptcy Act, 1914, which applies to company winding up by virtue of section 317 of the Companies...
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