Federal Commerce Ltd v Molena Alpha Inc; (The “Nanfri”): CA 1978

The court considered whether claim as against a shipowner could be set off against sums due under a time charter hire.
Held: Save for any contractual provision to the contrary a tenant is entitled to deduct from the rent payable, so as to extinguish or reduce an instalment of rent due, any cross claim arising out of the provisions of the lease and the operation of the lease. Equitable set-off is ultimately based on considerations of justice.
Lord Denning MR said: ‘It is now far too late to search through the old books and dig them out. Over 100 years have passed since the Judicature Act 1873. During that time the streams of common law and equity have flown together and combined so as to be indistinguishable the one from the other. We have no longer to ask ourselves what would the courts of common law or courts of equity have done before the Judicature Act? We have to ask ourselves: what should we do now so as to ensure fair dealing between the parties? See United Scientific Holdings Ltd. v. Burnley Borough Council [1978] A.C. 904 per Lord Diplock. This question must be asked in each case as it arises for decision: and then, from case to case, we shall build up a series of precedents to guide those who come after us. But one thing is clear: it is not every cross-claim which can be deducted. It is only cross-claims that arise out of the same transaction or are closely connected with it. And it is only cross-claims which go directly to impeach the plaintiff’s demands, that is, so closely connected with his demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross-claim. Such was . . Hanak v. Green.’
Goff LJ, Lord Denning MR
[1978] QB 927
Judicature Act 1873
England and Wales
ApprovedThe Teno 1977
The court considered the circumstances necessary to establish a right to a set-off in equity: ‘where the cross-claim not only arises out of the same contract as the claim but is so directly connected with it that it would be manifestly unjust to . .
ApprovedRoss T Smyth and Co Ltd v Bailey Son and Co HL 1940
The court looked to what had to be shown for one party to a contract to take the actions of the other as a repudiation.
Lord Wright said that: ‘repudiation of a contract is a serious matter, not to be lightly found or inferred’ and ‘I do not . .

Cited by:
CitedSonia Burkett, Regina (on the Application of) v London Borough of Hammersmith and Fulham CA 15-Oct-2004
The appellant challenged an order for costs after dismissal of her application for judicial review of the respondent’s planning decision. The claimant had been granted legal aid at about the time of the bringing in of the new legal aid scheme. The . .
CitedAltonwood Ltd v Crystal Palace FC (2000) Ltd ChD 7-Mar-2005
The landlord claimed arrears of rent and other payments due under the lease of the football ground occupied by the club. A licence had been granted for the accomodation to be shared with Wimbledon Football Club. The rent varied with the gate . .
CitedEdlington Properties Limited v J H Fenner and Co Limited CA 22-Mar-2006
The landlord had assigned the reversion of the lease. There was an outstanding dispute with the tenant defendant who owed arrears of rent, but sought to set these off against a claim for damages for the landlord’s failure to construct the factory in . .
CitedBritish Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd ChD 19-Dec-1978
Money expended by a tenant on discharging his landlord’s covenants will in appropriate circumstances operate as a partial or a complete discharge so as to furnish a defence at law to a claim for unpaid rent; and where the tenant has suffered damage . .
Appeal fromFederal Commerce Ltd v Molena Alpha Inc (The Nanfri) HL 1979
The charterers of three ships on time charter had made deductions from time charter hire payments which the shipowners regarded as unjustified. In retaliation the shipowners purported to revoke the authority of the Charterers (to be implied under . .
CitedGold Group Properties Ltd v BDW Trading Ltd TCC 3-Mar-2010
The parties had contracted for the construction of an estate of houses and flats to be followed by the interim purchase by the defendants. The defendants argued that the slump in land prices frustrated the contract and that they should not be called . .
CitedEller v Grovecrest Investments Ltd CA 1995
The court set out the history of the development of the law relating to the availability of set-off in the case where a landlord has levied or intends to levy distress.
Held: The law had developed, and an equitable right of set off against a . .
CitedFuller v Happy Shopper Markets Ltd and Another ChD 6-Mar-2001
A tenant complained to the landlord about his failure to repair. He ceased paying rent, and the landlord eventually distrained for rent by direct action.
Held: The tenant was unable to claim a legal set-off because there was no context of . .
FollowedGeldof Metaalconstructie Nv v Simon Carves Ltd CA 11-Jun-2010
The parties contracted for the supply and installation of pressure vessels by Geldof (G) for a building constructed by Simon Carves (SC). The contract contained a clause denying the remedy of set-off. G sued for the sale price, and SC now sought an . .
CitedDole Dried Fruit and Nut Co v Trustin Kerwood Ltd CA 1990
The defendant had an exclusive distributorship agency for the plaintiff in England. Under that agreement, the plaintiff sold its prunes and raisins to the defendant under separate contracts of sale. The plaintiff claimed the price of goods sold . .
CitedDurkin v DSG Retail Ltd and Another SC 26-Mar-2014
Cancellation of Hire Finance Contract
The claimant had bought a PC with a finance agreement with the respondent. He rejected it a day later, but the respondent refused to cancel the credit agreement. The respondent had threatened to report his non-payment to credit reference companies, . .

Lists of cited by and citing cases may be incomplete.
Updated: 29 August 2021; Ref: scu.185990