Geldof Metaalconstructie v Carves: Difference between revisions

The modern starting point of the law of equitable set-off is the decision of the Court of Appeal in {{Casenote|Hanak|Green}} [1958] 2 QB 9. In Hanak, Morris LJ held that [[equitable set-off]] was available: (a) if it would be “manifestly unjust" to enforce the claim without regard to the cross-claim; and (b) if there was a “close relationship between the dealings and transactions which gave rise to the respective claims".

The cases following Hanak, however, have not all been clear over how close this “close relationship" must be in order to satisfy the test, particularly for cross-claims brought under separate contracts.  

*Others have gone further and required that they also be “inseparably connected" ({{casenote|Bank of Boston Connecticut|European Grain and Shipping Ltd (The Dominique)}} [1989] AC 1056, {{casenote|Dole Dried Fruit and Nut Co|Trustin Kerwood Ltd}} [1990] 2 Lloyd's Rep 309.  

*There has also been a suggestion that the former “'''impeachment of title'''" test (a requirement that a cross-claim should be so closely connected that it impeaches the claimant's demand) is still relevant ({{casenote|Leon Corporation|Atlantic Lines and Navigation Co Inc (The Leon)}} [1985] 2 Lloyd's Rep 470).

Rix LJ reviewed the authorities and confirmed that there was no longer any place for the former “impeachment of title" test. He stated that the test to be applied was a single test with both a formal and a functional element:

Rix LJ acknowledged that the authorities expressed the formal element of the test in different ways, of which the “inseparable connection" test was only one formulation, and observed that that formulation was not especially helpful in cases involving separate contracts.