Not infrequently, a party against whom a claim is made (“the defendant”) may argue that he himself has his own claim against the original claimant (“the plaintiff”). The defendant could bring a separate cross-action against the plaintiff and the two actions could be heard together or separately. Occasionally, the defendant will only be able to obtain full satisfaction by bringing a separate action. Thus, a defendant who alleges that he has a claim against the plaintiff for a greater amount than that claimed by the plaintiff may be able to plead his claim, so as to extinguish his liability under the plaintiff’s claim, not only against the plaintiff but also against a third party to whom the plaintiff has assigned his claim; but the defendant can only press his claim for the amount by which his claim exceeds the plaintiff’s against the plaintiff himself and not against the assignee and he must seek complete redress from the plaintiff if the assignee takes absolutely, free from equities.1

More commonly, the defendant will raise his claim against the plaintiff in the proceedings initiated by the latter. The practical issue then becomes whether the defendant’s claim is to be classified as a counterclaim or has the additional quality of a set-off. This has been very much a live issue in recent years in two areas of shipping law.2 First, there arose the question whether a voyage charterer (and, by extension, a bill of lading holder) could deduct from freight payable by him sums allegedly due from the shipowner, to which the answer was a firm No. Secondly, there has been the more controversial question whether similar deductions could be made from hire payable by a time charterer, to which the judicial response has been fairly consistently but not altogether decisively Yes. The second issue has also involved some consideration of the precise circumstances in which a contractual right to deduct can be exercised. It is proposed, therefore, to consider the treatment of these issues in the light of the general development of set-offs and counterclaims in English law.

The evolution of set-offs and counterclaims is reasonably clear and is considered in detail in the classic exposition by Morris, L.J., in Hanak v. Green. 3