Lloyd's Maritime and Commercial Law Quarterly
SET-OFF AND COUNTERCLAIM—THE NECESSARY CONNECTION
Dole Dried Fruit and Nut Co. v. Trustin Kerwood Ltd.
The circumstances in which a defendant is entitled to set off a claim arising under one contract against the claim of a plaintiff based upon another contract have recently been considered by the Court of Appeal in Dole Dried Fruit and Nut Co. v. Trustin Kerwood Ltd.1 The consensus view had been that the courts would not permit an attempt to set off a contractual unliquidated damages claim against a separate and distinct liquidated claim, unless the two were inseparably connected.2 However, the precise nature of this connection has been called into question recently by the House of Lords in The Dominique,3 and the Court of Appeal have now endeavoured to shed some light upon the problem.
1. The facts
The plaintiffs were Californian producers of prunes and raisins, who relied upon the defendants to market their goods in England. The defendants were appointed the plaintiffs’ “sole and exclusive agents for importation and distribution”. It seems that the defendants would purchase the plaintiffs’ dried fruit at intervals, entering into a separate contract of sale on each occasion.
The dispute arose as a result of the act of the plaintiffs in purporting to terminate their arrangement with the defendants unilaterally and without notice in May 1989, whereupon the defendants commenced proceedings for unliquidated damages for breach of contract. The defendants also refused to pay for goods to the value of $735,000 supplied to them under a series of sales contracts and the plaintiffs sued for this amount. As the defendants did not deny liability under these contracts, the plaintiffs applied for summary judgment under R.S.C. Ord. 14. By way of defence, the defendants argued that they had the right to set off, against the $735,000 claimed, any sum which was awarded to them by the court in respect of the breach.
1. (1990) LMLN 276.
2. See, e.g., R. M. Goode, Commercial Law (1982), 731.
3. [1989] A.C. 1056; noted by J. R. Crabtree [1989] LMCLQ 289.
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