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 access, the second was in quantum meruit for the works completed, and the third was inn tort for trespass to his tools.
Held: The court was able to order a set-off of claims between the parties despite the absence of any specific plea in that behalf. Equitable set-off is not confined to debts or liquidated damages and so long as the cross-claim is sufficiently closely connected with the debt as to make it inequitable to take account of one without taking account of the other, then the set-off of the claim operates to reduce or eliminate the debt. Set-off operates by way of a defence. There are three occasions on which set-off is permissible: (1) set-off under the rule replacing the statutes of set-off; (2) what might be called abatement in certain cases at common law; and (3) equitable set-off.
Morris LJ said as to the first occasion: ‘The claims on both sides had to be liquidated debts or money demands which could be ascertained with certainty at the time of the pleading.’ and ‘The plaintiff, suing as agent or trustee for her son, claimed andpound; 50 from the defendant. The defendant had a perfectly good claim for andpound; 51 damages against the plaintiff’s son. It was held that the defendant could set up as a defence to the claim against him that the plaintiff’s son (the cestui que trust of the plaintiff) was indebted to the defendant in a sum for unliquidated damages exceeding the amount of the claim.
The conclusion seems to me to be clearly correct and obviously fair. It would have been manifestly unjust if the defendant had had to pay andpound;50 to the plaintiff (who was an agent or trustee for her son) at a time when the defendant had an unquestioned claim of andpound;51 against the plaintiff’s son who had left the country. There was a close relationship between the dealings and transactions which gave rise to the respective claims. If the case had been brought before the Judicature Act it would appear that the defendant would have had strong equitable grounds for asking a Court of Chancery to restrain the plaintiff from proceeding with her case. But since the Judicature Act the position is that matters of equity on which such injunctions might formerly have been obtained, may now be relied on by way of defence.’

Buxton LJ, Morris LJ
[1958] 2 QB 9, [1958] 2 WLR 755, [1958] 2 All ER 141
England and Wales
ApprovedIn re a Bankruptcy Notice CA 1934
. .
ExaminedBankes 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 by:
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CitedJohn Louis Carter Fourie v Allan Le Roux and others CA 7-Mar-2005
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CitedMellham Ltd v Collector of Taxes CA 17-Jan-2003
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CitedBurton (Collector of Taxes) v Mellham Ltd HL 15-Feb-2006
The claimant sought interest on an overpayment of Advance Corporation Tax. The tax itself had been paid late, and the Collector claimed a set off.
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ApprovedModern 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 . .
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 . .
ApprovedDole 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 . .
CitedGeldof 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 . .
CitedAries 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 . .
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 . .
CitedRedd Factors Ltd v Bombardier Transportation UK Ltd QBD 6-Oct-2014
The claimant sought payment under a contract for train seats supplied to the defendant. It had taken an assignment of the debt from the manufacturer. . .
CitedCape Distribution Ltd v Cape Intermediate Holdings Plc QBD 19-Jul-2016
Further judgment . .
CitedOfficeserve Technologies Ltd and Another v Anthony-Mike ChD 28-Jul-2017
Judgment on certain preliminary issues . .

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Litigation Practice, Equity, Landlord and Tenant

Leading Case

Updated: 01 November 2021; Ref: scu.184247