Legal Blog

Setoff

There is always a jockeying for position in a construction dispute. One example is set out in C & A Steel (1983) Ltd. v. Tesc Contracting Company Ltd., a 1998 decision of the Ontario Court (General Division).

Facts 

The sub commenced a lien action against the general to recover $97,000 that was owing to it regarding project “A”. The general agreed that it owed $48,000 on project “A” but asserted that the sub owed it $223,000 on project “B”. The sub brought a motion for judgment in the amount of $48,000, the amount that the general admitted it owed on project “A”.

Defence 

The judge noted that the Construction Lien Act specifically allowed for set-off as a defence. It states that “there may be taken into account the amount that is, as between a payer and the person the payer is liable to pay, equal to the balance in the payer’s favour of all outstanding debts, claims or damages whether or not related to the improvement“.

The judge refused to grant judgment to the plaintiff on its claim. In effect, the issues relating to both projects were to be tried in the one action.