§ 4. Pay, secure, or compound. Set-off or counter-claim. Pay the judgment debt in accordance with the terms of the judgment, or to secure or compound. The present Act dispenses with the various formula which it was necessary for the creditor to observe, before he was entitled to resort to debtor's summons, and the hardship which often resulted to the debtor, owing to the creditor's right to proceed concurrently with debtor's summons and his action has ceased to exist. By this section, in the case of a debtor served within the jurisdiction, seven days after service is the time limited within which the debtor must comply with the requirement; and if service is by leave out of the jurisdiction, then within such time as is limited by the order giving leave. In the absence of any such claim or demand as the section refers to the creditor will be entitled to proceed to bankruptcy (u). Nothing is said as to a stay of proceedings for the purpose of having a counterclaim, &c., determined. And it seems that upon satisfying the Court of the existence of such counter-claim, set-off, or cross demand, the right of the judgment creditor to proceed in bankruptcy, and his right to require security, or to have such compounding from the debtor, will then determine, and the Court will have no further discretion in the matter; for the language is "either comply with the requirements of the notice or satisfy the Court that he has a counter-claim, &c.," which clearly gives an option to the debtor to do one or the other. On the other hand, upon his either paying, securing, or making such satisfactory composition before the expiration of the time limited, or by satisfying the Court that he has such counterclaim, &c., no act of bankruptcy will have been committed (~). The question of liability being now one, not as regards the debtor, but of the creditor under the counter-claim, the Act seems to recognise the right of the debtor to have such counterclaim determined and unfettered by any order affecting his status. Which he could not set up in the action. These words clearly govern the context and regulate the right to have such claim inquired into. (u) And see Ex parte Marshall re Marshall, 5 Ch. D. 873; and Ex parte Sewell, 13 Ch. D. 266; Ex parte Greener, 15 Ch. D. 457. (x) See Ex parte Wier, supra. In the first place, is the Court to be satisfied of the validity of the claim, set-off, or demand, in other words, to try the question of the right and liability and to determine it; or only to be satisfied of the bonâ fide existence of such claim, set-off, or demand? that is to say, ascertain: (1) If there is a prima facie claim or right of set-off which he could not set up in the action; and (2) Whether it equals or exceeds the amount of the judgment debt? It is submitted that only the prima facie case upon both points will be gone into by the Court, and not to seek to ascertain the absolute liability and the amount, and in analogy to the jurisdiction formerly exercised under Sect. 7 of the 1869 Act, to "satisfy the Court of the allegations of the debtor" prior to dismissing the debtor's summons, or the present jurisdiction exercised by the Masters under Ord. 14 of the Judicature Act, where the language is: "unless the defendant by affidavit. or otherwise satisfy the Court or a judge that he has a good defence to the action on the merits or disclose such facts as may be deemed sufficient to entitle him to defend " (y). And it was held under this order that where the defendant's affidavit shows what the defence is, and gives reasons for thinking it is substantial and will be sustained by evidence, the defendant ought to be admitted unconditionally to defend (z). Generally it may be said that a defendant may now in an action set off or set up by way of counter-claim against the claims of the plaintiff any right or claim, whether such setoff or counter-claim sound in damages or not, but the Court or a judge may, on the application of the plaintiff before trial, if in the opinion of the Court or judge such set-off or counterclaim cannot be conveniently disposed of in the pending action, or ought not to be allowed, refuse permission to the defendant to avail himself thereof (a). And a defendant may now counter (y) See Shelford v. Louth Railway, 4 Ex. D. 317, C. A.; Thompson v. Marshall, 28 W. R. 220, C. A.; and judgment it was held ought not to be ordered if defendant can show a prima facie defence, or satisfy the judge that he ought to be allowed to interrogate the plaintiff, Harrison v. Bottenheim, 26 W. R. 362; and the existence of a mere counter-claim connected with the same transaction of itself entitled defendant to defend, (2) Runnacles v. Mesquita, 1 Q. B. (a) See R. S. C., Or. 19, r. 3; see also s. 24, sub-s. 3, J. A., 1873. § 4. § 4. Secured creditor claim in the original action any relief against the plaintiff which he could formerly have sought by cross action at law or suit in equity. So he may when sued jointly by plaintiffs by way of counter-claim set up claims which he has against them severally (b), or against assignee of a chose in action for damages for breach of contract by assignor (c). And there may be a counter-claim against plaintiff and a third or new parties; but it must relate to the subject matter of the original claim, and the plaintiff must be interested in it (d). On the other hand a counter-claim against an executor in his representative capacity, it was held, could not be joined with claims against him personally, and also that relief by counterclaim could only be sought in respect of causes of action which accrued prior to the issue of the writ (e). Such claims and demands against the judgment creditor as may have arisen subsequent to the judgment would probably also come within the meaning of the words of the section. it It would seem the claim or demand must also equal or exceed the amount of the judgment debt, so as to be available; if it is less than such debt, the debtor would be debarred from setting up at all in answer to the notice, notwithstanding it was such a claim as he was debarred from setting up in the action, and would therefore have to pay, secure, or compound, to avoid an act of bankruptcy, and afterwards bring his action for the amount of such counter-claim, set-off, or demand. Under the 1869 Act a secured creditor was entitled to suc out a debtor's summons without valuing or stating his willingness to give up the security (f), and so probably he still would be entitled to serve this notice, but if already he is fully secured it is not probable that the Court would now require further security. (b) Manchester, Sheffield, and Lincolnshire Railway v. Brooks, 2 Ex. D. 243. (c) Young v. Kitchen, 3 Ex. D. 127. (d) Padwick v. Scott, 2 Ch. D. 736; Trelevan v. Bray, 1 Ch. D. 176; Harris v. Gamble, 6 Ch. D. 748; Evans v. Buck, L. R. 4 Ch. D. 432. (e) Original Hartlepool Collieries Co. v. Gibb, 5 Ch. D. 713; but see Lecs v. Patterson, 7 Ch. D. 866; and Beddall v. Maitland, 17 Ch. D. 174. For the distinction between set-off and counter-claim, see Gathercole v. Smith, 7 Q. B. D. 626, C. A. (f) Ex parte Mauritz re Giles, L. R. 5 Ch. 779; 39 L. J. Bank, 56. Regard must also be had to Part 7 of this Act, giving the County Courts power to order summary administration where the property does not exceed in value 3007., and also to make administration orders in cases where the judgments are for small sums, and yet not exceeding in the aggregate the sum of 50%., and for the liquidation in bankruptcy of such indebtedness. It may also be added that the claim may also have been one which from its nature could not have been set up; as, for instance, such claim as in the County Courts a defendant cannot set up for want of jurisdiction. § 4. By Sect. 7, sub-s. 4, when the act of bankruptcy relied on Dismissal, &c., is non-compliance with a bankruptcy notice to pay, secure, or of petition. compound for a judgment debt, the Court may, if it thinks fit, stay or dismiss the petition on the ground that an appeal is pending from the judgment. (h.) If the debtor gives notice to any of his creditors Bankruptcy that he has suspended, or that he is about to Act, 1869, suspend, payment of his debts. s. 6. This act of bankruptcy is entirely new, and has been for the Notice of first time superadded to the more formal indication of a sus- suspension. pension of payment, viz., the filing of a declaration of inability to pay. It is submitted that its great informality (no writing seems even to be required as evidence of the fact) will lead to a good deal of contradiction and dispute, and will occasion some degree of harassment to debtors. It is not clear what will be deemed sufficient notice of "suspension," or "being about to suspend," and it seems scarcely probable that a bare statement by a debtor of his probable inability to carry on his business, or to pay his debts, without more formality, will in itself constitute an act of bankruptcy. It should here be noted that, where an action is pending against the debtor in any Court, the Judge having jurisdiction in bankruptcy has power to transfer such action to his own And in addition to the acts of bankruptcy already enumerated, Sect. 103, dealing with judgment debtor's summonses and the jurisdiction to commit under the Debtors Act, 1869, has given power to the Lord Chancellor to transfer such jurisdiction to the Bankruptcy Court, including the §§ 4, 5. County Courts exercising bankruptcy jurisdiction, though the amount exceed 501., and enables all such Courts, with the consent of the creditor, to make a "receiving order" against the debtor, and the debtor is to be deemed to have committed an act of bankruptcy at the time the receiving order is made. Form of notice. Jurisdiction to make receiving order. Protection of estate. An act of bankruptcy may also in a sense be committed by a debtor who dies insolvent, a creditor being entitled, under Sect. 125, to present a petition praying for an order of administration. As to judgments for sums in the County Courts where the total indebtedness does not exceed 501., see Sect. 122. (2.) A bankruptcy notice under this Act shall be in the prescribed form, and shall state the consequences of noncompliance therewith, and shall be served in the prescribed manner. As to form of notice, see Forms. As to the mode of service, see General Rules. Receiving Order. 5. Subject to the conditions herein-after specified, if a debtor commits an act of bankruptcy the Court may, on a bankruptcy petition being presented either by a creditor or by the debtor, make an order, in this Act called a receiving order, for the protection of the estate. For the protection of the estate. When the bill was first introduced, the word "interim" preceded the word "protection," but was afterwards omitted. A "receiving order" is clearly not tantamount to an "adjudication" in bankruptcy, and cannot have the same consequences as regards the rights and obligations of individuals, and has only the effect of vesting the estate in the receiver for "protection," and although the word "interim" is not em |