Dole Dried Fruit and Nut Company v Trustin Kerwood Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,LORD JUSTICE BELDAM |
| Judgment Date | 01 June 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0516-1 |
| Docket Number | 90/0430 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 June 1990 |
[1990] EWCA Civ J0516-1
Lord Justice Lloyd
Lord Justice Beldam
90/0430
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(HON. MR JUSTICE WEBSTER)
Royal Courts of Justice
MR STEPHEN PHILLIPS, instructed by Messrs Constant & Constant, appeared for the Appellant (Plaintiff).
MR D.H.R. MATTHEWS, instructed by Messrs Denton Hall Burgin & Warrens, appeared for the Respondent (Defendant).
In this case we have been asked to consider the circumstances in which a counterclaim can be relied on as a set-off in equity.
Webster J. applied a test derived from Lord Hobhouse's judgment in Government of Newfoundland v. Newfoundland Railway Company (1888) 13 A.C. 199, namely, whether the counterclaim is one which flows out of and is inseparably connected with the dealings and transactions which also give rise to the claim.
Webster J. evidently regarded this test as being narrower and more specific than the test to be found in The Nanfri [1978] Q.B. 927 and The Teno [1977] 2 Lloyd's Rep. 289. Nevertheless he held that on the facts, to which I will come later, the counterclaim could be relied on as a set-off.
Mr. Matthews, in a most interesting argument, submits that the test applied by Webster J. was not narrow enough. He should have applied the test to be derived from Rawson v. Samuel (1841) Cr. and Ph. 161. If the crossclaim is to be relied on as a set-off, it must "impeach the plaintiff's demand". This is, he submits, the test which now has the authority of the House of Lords in two recent decisions in which charterers have sought to set off a claim for damages against a shipowner's claim for freight: see The Aries [1977] 1 W.L.R. 185 and The Dominique [1989] 2 W.L.R. 440.
It is true that Lord Wilberforce in the former case referred to Rawson v. Samuel with approval, and Lord Brandon in the latter case described it as "the authority most relied on as providing the relevant test". But I do not read Lord Brandon's speech as casting any doubt on the test applied by Lord Hobhouse in the Government of Newfoundland case. Lord Brandon describes it as a "different version of the relevant test"; in other words, the same test in different language.
In The Aries and The Dominique the House of Lords were concerned with the question whether the principles of equitable set-off could be invoked so as to override the long-established rule of law that cargo claims cannot be deducted from freight. That was a rule of law which had stood for nearly 200 years. It is an arbitrary rule, in the sense that it has no very obvious justification. But it was the basis on which the parties had contracted. Accordingly the House of Lords declined to displace it. Seeing that the House of Lords was concerned in both cases with what might be regarded as an exception to the general principles of equitable set-off, it was natural that the House should have traced those principles back to their historical origin.
But for all ordinary purposes, the modern law of equitable set-off is to be taken as accurately stated by the Court of Appeal in Hanak v. Green [1958] 2 Q.B. 9. Morris L.J.'s judgment in that case was described by Lord Diplock in Modern Engineering v. Gilbert-Ash [1974] A.C. 689 at 717 as containing a masterly account of the subject. It is not enough that the counterclaim is "in some way related to the transaction which gives rise to the claim". It must be "so closely connected with the plaintiff's demand that it would be manifestly unjust to allow him to enforce payment without taking into account the crossclaim": see The Nanfri per Lord Denning at 774. To the same effect is Parker J. (as he then was) in The Teno at p. 297.
The authority of these cases has not been diminished by The Dominique. They establish that the mere existence of a crossclaim is insufficient. The claim and crossclaim must arise out of the same contract or transaction, and must also be so inseparably connected that the one ought not to be enforced without taking account of the other. It follows that the note in the White Book at 18/17/3 may be stated somewhat too broadly.
That is as far as one can go in defining the...
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