What is the current state of the law on set-off?

The leading case on set-off, relied on by both parties, is Telford v. Holt (1987), 1987 CanLII 18 (SCC), 41 D.L.R. (4th) 385 (S.C.C.). There are two types of set-off, legal set-off and equitable set-off.

There are two requirements of legal set-off. First, both obligations – the plaintiff’s claim and the defendant’s claim for which set-off is asserted – must be debts. Second, the debts must be mutual cross-obligations. A mutual cross-obligation is a debt due from each party to the other for liquidated sums, or money demands which can be ascertained with certainty at the time of pleading: see Telford v. Holt at 393.