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 equitable set off of damages for repudiation. The judge had put the question as that it was for SCL to show that there was an ‘inseparable connection’ between claim and counterclaim, and that it would be manifestly unjust to allow the former to be enforced without regard to the latter. He did not find that connection.
Held: The appeal against summary judgment denying the right of set off succeeded. The court examined in depth the development of the law of equitable set off and concluded: ‘I would underline Lord Denning’s test, freed of any reference to the concept of impeachment, as the best restatement of the test, and the one most frequently referred to and applied, namely: ‘cross-claims . . so closely connected with [the plaintiff’s] demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross-claim’.’ (‘the Nanfri’)
In this case, two contracts were involved.
Maurice Kay VP CA, Rix, Patten LJJ
[2010] EWCA Civ 667, [2010] CILL 2880, [2010] 4 All ER 847, [2011] Bus LR D61, 130 Con LR 37
Bailii
England and Wales
Citing:
Cited – Bim Kemi v Blackburn Chemicals Ltd CA 3-Apr-2001
The question was the degree of connection which must be shown between (1) a claim for unliquidated damages for breach of a contract and (2) a cross-claim for unliquidated damages for breach of a different contract between the same parties, in order . .
Cited – Hanak v Green CA 1958
A builder was sued for his failure to complete the works he had contracted for. The buider sought a set-off against that claim of three of his one claims. One, under the contract, was for losses from the defendant’s refusal to allow his workmen . .
Cited – Bankes v Jarvis 1903
The plaintiff was his son’s agent. The son purchased a veterinary surgeon’s practice from the defendant, agreeing to pay the rent and indemnify the defendant against liability under a lease of premises from which the practice was carried on. The son . .
Cited – Aries Tanker Corp v Total Transport Ltd; The Aries HL 1977
Claims for freight charges are an exception to the general rule that all claims between parties must be resolved in one action. A claim for freight cannot be a claim ‘on the same grounds’ as a counter-claim for loss or damage arising out of the . .
Followed – 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 . .
Cited – Leon Corporation v Atlantic Lines and Navigation Co Inc (‘The Leon’) 1985
The court discussed the application of the equitable doctrine of set-off. Justice Hobhouse said: ‘Equitable principles derive from a sense of what justice and fairness demand. This does not mean that equitable set-off has been reduced to an exercise . .
Cited – Federal 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 . .
Cited – Dole 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 . .
Cited – Government of Newfoundland v Newfoundland Railway PC 7-Feb-1888
A railway company and its assignees brought action the Government. Under the contract the company was to build a railway subsidised by the government. The railway was not completed. The parties disputed whether the contract was ‘entire’ and no part . .
Cited – Rawson v Samuel 15-Apr-1841
Cottenham LC said: ‘We speak familiarly of equitable set-off as distinguished from set-off at law, but it will be found that this equitable set-off exists in cases where the party seeking the benefit of it can show some equitable ground for being . .
Cited – Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd HL 1974
The court considered how to construe a clause in a contract which excluded a remedy provided by law. Lord Diplock said: ‘It is, of course, open to parties to a contract . . to exclude by express agreement a remedy for its breach which would . .
Cited – Esso Petroleum Company Ltd v Milton CA 5-Feb-1997
A direct debit arrangement is tantamount to a payment by cash and so precludes the use of the defence of set-off for non-payment. . .
Cited – Esso Petroleum Company Ltd v Mardon CA 6-Feb-1976
Statements had been made by employees of Esso in the course of pre-contractual negotiations with Mr Mardon, the prospective tenant of a petrol station. The statements related to the potential throughput of the station. Mr Mardon was persuaded by the . .
Cited – Stocznia Gdynia Sa v Gearbulk Holdings Ltd CA 13-Feb-2009
Orders were placed for the construction of ships. They were not delivered. The buyer, the defendant, cancelled the orders. The defendants sought the loss of profit. The claimants said they were entitled only to the repayment of instalments. The . .
Lists of cited by and citing cases may be incomplete.
Contract, Equity
Updated: 02 November 2021; Ref: scu.416737