Addax Bank BSC (c) v Wellesley Partners LLP

For summary judgment, a contractual repayment obligation is construed from the agreement’s express terms and commercial operation. Where an agreement identifies contributions in a particular currency, later repayment may properly be required in that currency even if the original payment was made in sterling. A legal set-off requires mutual liquidated debts, or debts capable of ascertainment without valuation or estimation. Equitable set-off involves both a formal requirement of close connection and a functional requirement that it would be manifestly unjust to enforce the claim without taking the cross-claim into account. These are connected elements rather than separate stages. Their application is fact-sensitive.

The claimant bank sought summary judgment under CPR Part 24 for the remaining balance of a contractual repayment obligation. It had exercised a contractual right to terminate part of its membership in the defendant LLP and claimed repayment of part of its capital contribution, together with interest.

The defendant disputed the currency of the obligation and validity of the exercise notice. It also sought permission to amend its defence to plead legal and equitable set-off based on unpaid consultancy retainer invoices under an earlier contractual arrangement. The central issues were whether those defences had a realistic prospect of success and whether there was any other reason for the claim to proceed to trial.

1. Summary judgment refused. The claimant’s application was rejected because the defendant’s proposed legal and equitable set-off defences had realistic prospects of success.
2. The agreement was construed as requiring the relevant capital contribution and repayment to be measured and made in US dollars. The dollar figures in Schedule 1, the calculation of the original sterling payment by reference to dollars, and the defendant’s later dollar payments supported that construction. The exercise notice was therefore valid and did not fail because it referred to US dollars.
3. A statutory legal set-off is available only where the claims are mutual and concern liquidated debts, or money demands capable of ascertainment without valuation or estimation. The unpaid monthly retainer invoices satisfied that threshold for present purposes, although their ultimate validity remained a matter for trial.
4. Permission was granted to amend the defence to plead legal set-off. The lateness of the application was not decisive because the proposed defence had a realistic prospect of success, prejudice could be addressed through costs, and the amendment would not postpone the lost trial window.
5. Equitable set-off requires consideration of both a formal element, namely a sufficiently close connection between claim and cross-claim, and a functional element, namely whether it would be manifestly unjust to enforce the claim without taking the cross-claim into account. The elements are not separate stages. Whether the connection exists is a question of fact and degree, and later dealings may be relevant.
6. Applying those principles, the unpaid consultancy invoices and the repayment claim formed part of the parties’ broader commercial and financial relationship. It would be artificial and unjust to enforce repayment without considering the general state of account. The equitable set-off defence therefore also had a realistic prospect of success.
7. The claimant was entitled to contractual interest at 1% above Barclays Bank Plc base rate, subject to set-off and/or counterclaim.