shareholder may set off such a debt (f); and, where a limited company is being wound up by the Court, or under the supervision of the Court, a contributory is not entitled-even if there be an agreement to that effect between himself and the company -to set off money due to him from the company, in an action against him for a call, made either before or during the winding up (g). But as to a stranger and non-contributory debtors to a company, sect. 10 of the Judicature Act has imported into winding-up the ordinary rules of set-off in bankruptcy (h), except that sect. 164 of the Companies Act, 1862, 25 & 26 Vict. c. 89, avoiding disposition of the property of a company in liquidation is not modified by sect. 38 of the Bankruptcy Act, 1883, 46 & 47 Vict. c. 52 (i). Release from debts. Excepted debts, from which dis rupt not released. SECT. 10.-Bankruptcy (k). By sect. 30 of The Bankruptcy Act, 1883, 46 & 47 Vict. c. 52 (1), the effect of the order of discharge is to release the bankrupt from all debts provable under the bankruptcy, with the following exceptions, viz. : 1st. Debts or liabilities incurred by means of fraud, or fraudulent breach of trust; 2ndly. Debts or liabilities whereof the charged bank bankrupt has obtained forbearance by fraud; 3rdly. Debts due to the Crown; and 4thly. Debts with which the bankrupt stands charged at the suit of the Crown, or of any person, for any offence against a statute relating to any branch of the public revenue; or at the suit of the sheriff or other public officer, on a bail-bond for the appearance of any person prosecuted for any such offence. And even as to these last two kinds of debts, the order of discharge will release the bankrupt, if the Commissioners of the (f) Gibbs and West's case (1870), L. R., 10 Eq. 312; per Lord Chelmsford, C., Grissell's case (1866), L. R., 1 Ch. 528, 536; per Mellish, L.J., Black's case (1872), L. R., 8 Ch. 254, 265. (g) Black's case (1872), L. R., 8 Ch. 254; and see Brighton Arcade Co. v. Dowling (1868), L. R., 3 C. P. 175; Calisher's case (1868), L. R., 5 Eq. 214; Sankey Brook Coal Co. v. Marsh (1871), L. R., 6 Ex. 185; Gill's case (1879), 12 Ch. D. 755; Kent's case (1888), 39 Ch. D. 259, C. A., and see Lindley on Companies, 5th ed., pp. 857-859. But where a shareholder in a limited company becomes bankrupt, his trustee is entitled to set off a debt due from the company to the bankrupt, against a demand for calls, made against him by the official liquidator. Re Duckworth (1867), L. R., 2 Ch. 578. (h) In re Ince Hall, &c., Co. v. Douglas Forge Co. (1882), 8 Q. B. D. 179; Mersey Steel and Iron Co. v. Naylor (1884), 9 App. Cas. 434; Lce and Chapman's case (1885), 30 Ch. D. 216, C. A., and see Lindley on Companies, 5th ed., p. 738. (i) Kent's case (1888), 39 Ch. D. 259, C. A. (k) And see ante, Ch. VII., sect. 7, p. 164, "Contracts with Bankrupts and their Trustees.' (Substantially reproducing sect. 49 of the Act of 1869. Treasury certify in writing their consent to his being discharged CH. XXIII. therefrom (m). s. 10. Usual The order of discharge will not discharge the bankrupt's Defences (Bankruptcy). partner, or any one who was jointly bound, or has made a joint contract with him (n). And where one of several persons who were joint debtors is discharged from liability by his bankruptcy, the creditor need not sue him with the other parties. But if one of two partners becomes bankrupt, his order of discharge releases him from both his joint and separate debts (o). Does not release joint contractor, who may be sued alone. Releases from joint and separate and from It is also a general rule, that if a debt may be proved under a debts; bankruptcy, the bankrupt, when discharged, is not only dis- consequential charged from liability for such debt, but also from any conse- damages. quential damages which may result or arise from the non-payment thereof (p). As to the demands for which a creditor may prove under the bankruptcy, it is enacted by sect. 37 of the Bankruptcy Act, 1883, 46 & 47 Vict. c. 52, reproducing, with little variation, sect. 31 of the Bankruptcy Act, 1869, as follows: 1st. That demands in the nature of unliquidated damages, arising otherwise than by contract or promise, shall not be provable in bankruptcy. 2ndly. That no person having notice (q) of any act of bankruptcy, available for adjudication against the bankrupt, shall prove for any debt or liability contracted by the bankrupt subsequently to the date of his so having notice. What debts 3rdly. That, save as aforesaid, all debts and liabilities, present Future and and future, certain or contingent, to which the bankrupt is subject liabilities. contingent at the date of the order of adjudication, or to which he may become subject during the continuance of the bankruptcy (r), by reason of any obligation incurred previously to that date, shall be deemed to be debts provable in bankruptcy. And-after pointing out the mode in which the value of debts or liabilities which, for any reason, do not bear a certain value, is to be estimated for the purpose of proof, and declaring that "the amount of such value, when assessed, shall be provable (m) Bankruptcy Act, 1883, s. 30, supra. (n) 46 & 47 Vict. c. 52, s. 30. (0) Ex parte Hammond (1873), L. R., 16 Eq. 614. (p) Van Sandau v. Corsbie (1819), 3 B. & Al. 13. (9) That is, having specific information as to the acts which constitute the act of bankruptcy-a notice which See (r) That is, up to the time of his CH. XXIII. s. 10. Bankruptcy. What Effect of s. 37 (8) of Hardy v. as a debt under the bankruptcy" (8), sect. 37 of the Bankruptcy Act, 1883, concludes by enacting in sub-s. (8) :— That "liability" shall, for the purposes of the Act, include any compensation for work or labour done, any obligation or possibility of an obligation to pay money or money's worth; on the breach of any express or implied covenant, contract, agreement, or undertaking, whether such breach does or does not occur, or is or is not likely to occur, or capable of occurring before the close of the bankruptcy (t); and that, generally, it shall include any express or implied engagement, agreement, or undertaking to pay, or capable of resulting in the payment of money or money's worth, whether such payment be, as respects amount, fixed or unliquidated; as respects time, present or future, certain, or dependent on any one contingency, or on two or more contingencies; and, as to the mode of valuation, whether it be capable of being ascertained by fixed rules, or be assessable only by a jury, or as a matter of opinion. The effect of this enactment is, that " every possible demand, every possible claim, every possible liability, except for personal torts, is to be the subject of proof in bankruptcy;" "the broad purview of the Act" being, "that the bankrupt is to be a freed man-freed not only from debts, but from contracts, liabilities, engagements, and contingencies of every kind (u); and in Hardy v. Fothergill (x) it was held by the House of Lords to extend to the contingent liability of the assignee of a lease upon the covenant of indemnity of the lessee by such assignee against the liability upon, amongst other covenants, the covenant to yield up the demised premises. And it is enacted by sect. 9, that on the making of a receiving order against a debtor, no creditor to whom the bankrupt is indebted in respect of any debt provable in the bankruptcy, shall have any remedy against the property or person of the bankrupt in respect of such debt, except in manner directed by the Act; and further, by sect. 10, that the Bankruptcy Court may, at any time after the presentation of a bankruptcy petition against the debtor, restrain further proceedings in any action, suit, execution, or other legal process against the debtor (y); or it may allow such (s) And such proof is final for all purposes, so long as the bankruptcy lasts; Ex parte Bates (1879), 11 Ch. D. 914, C. A. (t) See sect. 47. (u) Per James, L.J., Ex parte Llynvi Coal and Iron Co. (1871), L. R., 7 Ch. 28; and see Ex parte Waters (1873), L. R., 8 Ch. 562; Flint v. Barnard (1888), 22 Q. B. D. 90, C. A. (x) Hardy v. Fothergill (1888), 13 App. Cas. 351. (y) This has been held to apply only to proceedings against the debtor alone, and not to proceedings against him jointly with any other; Ex parte Isaac (1870), L. R., 6 Ch. 58. proceedings, whether in progress at the commencement of the bankruptcy, or commenced during its continuance, to proceed on such terms as it may think just. CH. XXIII. SECT. 11.-Equitable Defences. The Common Law Procedure Act, 1854, 17 & 18 Vict. c. 125, by sects. 83-86, first allowed defendants to set up equitable defences in common law actions; but in exercising the powers conferred on the Courts of Common Law by the above enactments, it was held, first, that it was entirely in the discretion of the Courts to allow equitable matter to be pleaded or not; and, secondly, that they would not allow such matter to be pleaded unless it appeared clearly, or at least with reasonable certainty, what the equity was on which the party relied, and that the facts were such as would support such equity; and the construction put by the Courts (2), on the Act of 1854, ss. 83, 85 and 86, was probably much narrower than was intended or contemplated by the framers of that Act. This resulted in the remedies given by those sections being of very little practical use at common law, and in suitors being still obliged to resort to the Court of Chancery, as before, for the purpose of obtaining a complete remedy (a). Cases in able defences which equitwere allowed under C. L. P. Act, 1854. defences This state of things, long felt and acknowledged to be a great Equitable evil, was done away with by the 24th section of the Supreme de Court of Judicature Act, 1873, whereby it is enacted, amongst Judicature other provisions of a similar nature, that "If any defendant claims to be entitled to any equitable estate or right, or to relief upon any equitable ground, against any deed, instrument or contract, or against any right, title, or claim, asserted by any plaintiff or petitioner in such cause or matter, or alleges any ground of equitable defence to any claim of the plaintiff or petitioner in such cause or matter, the said Courts respectively, and every judge thereof, shall give to every equitable estate, right, or ground of relief so claimed, and to every equitable defence so alleged, such and the same effect, by way of defence against the claim of such plaintiff or petitioner, as the Court of Chancery ought to have given if the same or the like (z) See Bartlett v. Wells (1862), 1 B. & S. 836; Mines Royal Society v. Magnay (1854), 10 Exch. 489. (a) See First Report of the Judicature Commissioners, p. 7. Act, 1873, s. 24 (2). s. 11. Equitable Counter s. 24 (3) of the Jud. Act, 1843. CH. XXIII. matters had been relied on by way of defence, in any suit or proceeding instituted in that Court for the same or the like purpose, before the passing of this Act" (b); and further, that "The said Courts (i.e., the High Court and the Court of Appeal) claims under respectively, and every judge thereof, shall also have power to grant to any defendant, in respect of any equitable estate or right, or other matter of equity, and also in respect of any legal estate, right, or title claimed or asserted by him, all such relief against any plaintiff or petitioner, as such defendant shall have properly claimed by his pleading, and as the said Courts respectively, or any judge thereof, might have granted in any suit instituted for that purpose, by the same defendant against the same plaintiff or Relief against petitioner "; and that the Courts shall have power to grant “all third party. such relief relating to or connected with the original subject of the cause or matter and in like manner claimed against any other person, whether already a party to the same cause or matter or not, who shall have been duly served with notice in writing of such claim pursuant to any Rule of Court (c) or any Order of the Court as might properly have been granted against such person if he had been made a defendant to a cause duly instituted by the same defendant for the like purpose." (b) Where the defendant in an action in one of the Divisions of the High Court, other than the Chancery Division, relies on an equity to have a deed set aside as part of his defence, the Division in which the action is, may, under this section, give effect to the equity so far as is incidental to the purposes of the defence; Mostyn v. West Mostyn Coal and Iron (c) See R. S. C., Order XVI., r. 48 et seq. and cases thereon in the Annual Practice, especially Baxter v. Franee [1895], 1 Q. B. 455, and Sheffield Corporation v. Barclay [1903], 1 K. B. 1, C. A. |