Jonathan Arr charts the history of equitable set-off
In Geldof Metaalconstructie NV v Simon Carves Limited [2010] EWCA Civ 667 [2010] All ER (D) 69 (Jun), Rix LJ noted, not without a degree of understatement, that “there appears to be some uncertainty on the subject” of equitable set-off. Thankfully, his judgment in this case has clarified the position, while at the same time extending the circumstances in which equitable set-off can apply.
The law of set-off
Why is it important?
Set-off is the ability of a debtor to reduce or eliminate its monetary liability to a creditor by taking into account monies owed by the creditor to the debtor. In the context of litigation, set-off operates as a defence to a claim, which means it has a number of advantages over a counterclaim.
In particular:
(i) a counterclaim, if tried separately, does not prevent enforcement of the main claim if judgment is obtained in the meantime. A defendant with a complex counterclaim might have to pay monies out under a summary judgment for the main claim
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