Set-Off

Daly Square Inc. v. 1786097 Ontario Inc. and Camille Mikhael, 2018 ONSC 6404 (CanLII)

[28] While legal set off requires mutual debts, equitable set off does not. Equitable set off may apply where a defendant makes a claim against a plaintiff in relation to the same contract or series of events that gave rise to the plaintiff’s claim. Five principles are relevant to the availability of equitable set off: 1) The party claiming set off must show that it has an equitable basis for being protected from the opposite party’s claim; 2) the equitable basis must go to the very root of the plaintiff’s claim; 3) the counterclaim must be so clearly connected with the plaintiff’s demand that it would be manifestly unjust to allow the plaintiff to enforce payment without taking the counterclaim into consideration; 4) the claim and the counterclaim do not have to arise out of the same contract; and 5) unliquidated claims are on the same footing as liquidated claims.

[39] Legal set off applies to mutual debts.[4] “Mutual debts” are debts due from either party to the other for liquidated sums or money demands which can be ascertained with certainty at the time of pleading.[5]