“He owes me more than I owe him” is the commonest defence in a debt case. The Act gives it a name, a procedure and a surprising consequence when the counter-debt is large.
What a set-off is
A set-off is a cross-demand for money that the defendant raises against the complainant’s claim so that only the balance is ordered. Section 1 defines “complaint” to include a notice of set-off, so the defendant raising one is treated, for that purpose, as a complainant: the same rules about particulars, evidence and dismissal apply to the set-off as to the claim. Section 146 directs the Court to make an order against the complainant or dismiss the set-off “as the case requires”. The Magistrates’ Manual notes that the Frauds and Limitations Act treats the limitation period for a set-off separately from the claim, so a defendant may be able to set off a debt even where the complainant’s own claim is time-barred, or vice versa.
Notice is essential
(1) Without the permission of the Court, the defendant in a complaint for a debt shall not (a) set off a debt or demand claimed or recoverable by him from the complainant; or (b) set up by way of defence illegality, infancy, coverture, a Statute of Limitations or discharge in bankruptcy or insolvency, unless, a reasonable time before the hearing, written notice of his intention has been given to the complainant personally, by post, or at his usual or last-known abode or business, or at his address for service in the summons.
(2) The defendant shall produce a copy of the notice at the hearing and, unless it is admitted, prove that it was given, and in default of that proof no set-off or defence shall be set up except by consent.
Regulation 24 fills in the detail: a notice stating the defendant’s name and address with a concise statement of the ground, sent to the complainant and the Clerk, delivered or posted so as to arrive at least 24 hours before the summons is returnable; and regulation 24(3) allows the Court, if notice was not given and the complainant does not consent, to adjourn on terms so that it can be. Section 133(2) requires concise particulars of the set-off, with dates, items and prices, to be endorsed on or annexed to the notice. See the special defences.
When the set-off is bigger than the claim
(1) In a complaint in which the defendant is allowed to set off a debt or demand, the defendant may recover the amount by which the set-off exceeds the debt claimed and proved by the complainant, and shall have an order for that amount.
(2) If a set-off exceeds the amount in respect of which the Court has jurisdiction, and the Court is satisfied that the set-off is claimed bona fide and the defendant does not abandon the excess, no order shall be made on the complaint.
| Claim | Set-off proved | Result |
|---|---|---|
| K5,000 | K2,000 | Order for the complainant for K3,000 |
| K5,000 | K5,000 | Complaint dismissed; no order either way |
| K5,000 | K7,000 | Order for the defendant for K2,000 under s 154(1) |
| K5,000 | K12,000 claimed bona fide, before a Principal Magistrate, excess not abandoned | No order on the complaint; the whole dispute goes to the National Court |
| K5,000 | K12,000, but defendant abandons the excess over K10,000 | Order for the defendant for K5,000 |
A genuine counter-claim above the money limit stops the District Court from making any order on the complaint. The Court must be satisfied the set-off is bona fide, so a manufactured figure will not do, but a defendant with a real large claim against the complainant can insist that the whole matter be decided in the National Court. See the money limit.
If the complainant does not appear
Section 144 provides that where the defendant attends and the complainant does not, the Court shall dismiss the complaint and hear and determine the defendant’s set-off if notice was given, or adjourn on terms. So a defendant who has served a set-off notice does not lose it because the complainant stays away; he can obtain an order on it in the complainant’s absence.
Set-off and cross-claim
The Act speaks of set-off, a money cross-demand deducted from a money claim. A cross-claim for something else, such as delivery of goods or damages of a different kind, is not strictly a set-off but section 22 requires the Court to give effect to every ground of defence or counterclaim, whether equitable or legal, as the National Court would, and regulation 46 lets the Court borrow the National Court’s procedure. In practice a defendant with a cross-claim files it with the set-off notice, and the Court deals with both at the hearing, subject to the money limit. Section 136 applies the particulars and further particulars provisions to a set-off as if it were a complaint.
Costs and finality
Costs on a set-off are in the Court’s discretion under section 260. Section 147 lets a defendant withdraw a set-off before determination on paying costs and bring it afresh, and section 152 makes a determined set-off final: no other action can be brought for the same debt.
The District Courts Act and Regulation are not on PacLII; both are on vLex (Act, Regulation).
Before relying on anything here, read the current text of the District Courts Act (Chapter 40) and check for later amendments. The Act is not on PacLII; the figures and time limits quoted in this series come from the consolidation to No 8 of 2000, and the District Courts (Amendment) Act 2009 changes some of them once it is brought into operation. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.