Set-off

A defence that says you should not have to pay the full amount claimed because the other side owes you money too — without the cost or complexity of bringing a separate counterclaim.

Is a set-off the same as a counterclaim?

No, though the two are often pleaded together. A set-off is a defence — it says the amount you owe should be reduced or wiped out because the other side owes you money too. A counterclaim is a separate claim in its own right, which the defendant must prove and which survives even if the claimant's own claim is dropped. A set-off only reduces what is owed on the claim in front of the court; it does not generate a separate award unless it is also brought as a counterclaim.

Do the two debts need to be for the same kind of thing?

Not necessarily. A legal set-off traditionally required mutual debts — money owed each way, both due and payable. An equitable set-off is more flexible: it can apply where the cross-claim arises out of the same transaction or a closely connected one, even if it is for a different kind of loss, such as a claim for defective work being set against an invoice for the same job.

Do I have to pay an extra court fee to rely on a set-off?

No. Because a set-off is a defence rather than a separate claim, you do not pay the additional court fee that applies to a counterclaim. If you want the excess of your cross-claim over the original claim awarded to you as well, that part needs to be brought as a counterclaim, which does attract its own fee.

Can I raise a set-off if I never complained about the problem before?

You can, but it may be viewed with more scepticism if it appears for the first time in your defence, especially if you paid other invoices from the same supplier without objection in the meantime. Evidence that you raised the issue at the time — an email, a message, a note of a phone call — makes a set-off far more persuasive than one raised only once you have been sued.

Can a set-off reduce a claim to nothing?

Yes, if the cross-claim equals or exceeds the amount claimed, it can extinguish the claim entirely. If the cross-claim is worth more than the original claim, the excess is not automatically awarded to the defendant unless it is also pursued as a counterclaim — a set-off on its own only cancels out what is owed, it does not create a positive balance in the defendant's favour.

Where do I set out a set-off in my paperwork?

In your defence (form N9B for a defended claim, or the free-text defence in the online Money Claim service), setting out the facts giving rise to the cross-claim and the amount you say should be deducted, in the same way you would plead any other defence.

Legal set-off and equitable set-off

The traditional, narrower version is a

: two debts of the same kind, both due and payable between the same parties, which can simply be netted off against each other. A more flexible version,

, applies where the defendant's cross-claim is closely connected to the claimant's claim — typically arising from the same contract or transaction — even if it is a different kind of claim, such as a defects claim being set against an unpaid invoice for the same job.

Either way, the practical effect for a small claims defendant is the same: instead of having to pay the full amount claimed and then chase the other side separately for what you say they owe you, you can ask the court to deal with both sides of the story in one set of proceedings and only order payment of the net difference.

Set-off versus counterclaim

• A set-off only reduces or cancels what you owe on the claim against you. A counterclaim is a separate claim for a remedy of its own, which can exceed the value of the original claim.
• Relying on a set-off does not require an extra court fee. Bringing a counterclaim does.
• What happens if the claim is withdrawn.
• A set-off generally falls away with the claim it was answering. A counterclaim survives and can be pursued to judgment on its own.
• Many defendants plead a set-off and a counterclaim together — the set-off deals with the amount claimed, and the counterclaim captures any excess owed to them.

A decorator sues a homeowner for £1,800, the balance of an invoice for repainting a house. The homeowner accepts the work was mostly done but says one room was left with visible brush marks and had to be repainted by someone else at a cost of £650, which she raised by text message at the time.

Set-off for defective work

Net sum, if set-off succeeds

Because the homeowner has contemporaneous evidence that she complained at the time, the set-off is credible. If the court accepts it, judgment is only given for the net £1,150 — the homeowner does not need to have brought a separate claim to get credit for the defective work.

Particulars of claim

Civil Procedure Rules, Part 16

Respond to a court claim for money

Set-off — Small Claims Glossary

What a set-off defence is, how it differs from a counterclaim, and how to use it to reduce what you are being sued for.