Geneva Finance Ltd (Receiver and Manager Appointed) v BOYS

Geneva Finance Ltd (Receiver and Manager Appointed) applied to strike out the counterclaim of the defendants, Alan Harold Boys, Ronald George Howard, Desmond Frank Crawley, Anthony Hayes Douglas-Brown, Anthony Howard Leibowitz, and Kevin Ernest Judge. The defendants carried on the business of accountants under the firm name of Horwath and Horwath. The plaintiff engaged the defendants to act as its auditors. The plaintiff alleged that the defendants were in breach of the audit contract by failing to identify that inadequate provision had been made for doubtful and bad debts. The defendants denied the existence of the audit contract and the terms pleaded by the plaintiff. They also denied that they were subject to the duties alleged by the plaintiff but pleaded in the alternative that they fulfilled their obligations. The defendants then brought a counterclaim, alleging that if an audit contract existed, it contained implied terms different to the terms of the contract contended for by the plaintiff. They also alleged that the plaintiff was negligent in making representations concerning the provision for bad or doubtful debts. The plaintiff contended that the counterclaim was defective in that it did not disclose a reasonable cause of action and could prejudice, embarrass or delay the fair trial of the action. The plaintiff argued that the defendants could not approbate and reprobate. Hasluck J held that the defendants could not plead inconsistent facts in the statement of claim and counterclaim. He also held that the counterclaim was insufficiently particularised. The counterclaim was accordingly struck out, but with leave to replead.