|
Set-off and Limitations. Grand Financial Management Inc. v. Solemio Transportation Inc.
In Grand Financial Management Inc. v. Solemio Transportation Inc. (Ont CA, 2016) the Court of Appeal considered the elements of the doctrine of equitable set-off, and when it is subject to limitation periods:Equitable Set-Off
[92] On the cross-appeal, Grand Financial advances, for the first time, an equitable set-off argument. It submits that it is entitled to set-off against the $175,000 damages at large awarded to Solemio on its counterclaim any amounts owing to it under the Wild Lions Agreement. And, because set-off is a defence and not a claim in itself, Grand Financial contends that, as a defendant to a counterclaim, it was able to raise the defence, and was entitled to do so despite any limitation defence available to Solemio in respect of amounts owing under the Wild Lions Agreement.
[93] In support of the latter submission, Grand Financial relies on the decision of Canada Trustco Mortgage Co. v. Pierce, (2005), 2005 CanLII 15706 (ON CA), 254 D.L.R. (4th) 79, 197 O.A.C. 369 (C.A.), at para. 43, in which this Court adopted the following statement of Lord Denning in Henriksens Rederi AIS v. PHZ Rolimpex, [1973] 3 All E.R. 589 (C.A.), at p. 593:In point of principle, when applying the law of limitation, a distinction must be drawn between a matter which is in the nature of a defence and one which is in the nature of cross-claim. When a defendant is sued, he can raise any matter which is properly in the nature of a defence, without fear of being met by a period of limitation. ....
[97] Equitable set-off is a defence that is particularly rooted in the circumstances of the individual case. It requires, amongst other things, that the set-off claim go directly to impeach the plaintiff’s demands, the “plaintiff” in this case being Solemio and the “claim” being an award of damages to compensate it for harm suffered as a result of an intentional wrongdoing – the tort of interference with economic relations. To put it another way, the defence requires that the set-off claim be so closely connected to the plaintiff’s demands that it would be “manifestly unjust” to allow the plaintiff (Solemio) to enforce payment without taking into account the set-off claim: see Holt v. Telford, 1987 CanLII 18 (SCC), [1987] 2 S.C.R. 193, at p. 212; Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716 (CanLII), 340 O.A.C. 359, at paras. 55-59; Ang v. Premium Staffing Ltd., 2015 ONCA 821 (CanLII).
[98] In addition, the application of equitable set-off is subject to the equitable doctrine of “clean hands”. The courts will not allow a party to set-off “where there [is] an equity to prevent [the party from] doing so; that is to say, where the rights, although legally mutual, [are] not equitably mutual”: In re Whitehouse & Co. (1878), 9 Ch. D. 595, at p. 597; see also Stewart v. Bardsley, 2014 NSCA 106 (CanLII), at paras. 54-61; Saskatchewan Wheat Pool v. Feduk, 2003 SKCA 46 (CanLII), at para. 63; and Kelly R. Palmer, The Law of Set-Off in Canada (Aurora, Ontario: Canada Law Book Inc., 1993), at p. 66. Here, Grand Financial seeks to set off against its contractual claim under the Wild Lions Agreement Solemio’s judgment for damages caused by Grand Financial’s own intentional wrongdoing, albeit a wrongdoing that may have some connection with, or arise from, the issues regarding the Wild Lions Agreement. Whether equitable set-off would be available as a defence in such circumstances is something that would require viva voce evidence and credibility findings made during an assessment focused on that particular issue.
|
