IG Index Ltd v Ehrentreu

A settlement which acknowledges that an entire debt is due and prescribes staged payments may exclude equitable set-off, even without using the word “set-off”. That conclusion does not, without clear release language, extinguish an independent cross-claim for unliquidated damages. The debtor must pay the agreed debt but may pursue the cross-claim separately.

A contravention of financial-services rules does not make a transaction void or unenforceable because section 151 of the Financial Services and Markets Act 2000 expressly prevents that consequence.

A spread-betting customer incurred a debit exceeding £1.2 million after the company did not close his positions following unpaid margin calls. He later signed a Settlement Agreement acknowledging the entire debt and agreeing to staged repayment. He nevertheless alleged breaches of contract and statutory duty and sought to deploy the resulting damages claim as an equitable set-off.

Master Fontaine entered judgment for most of the debt but permitted a defence as to part. On appeal, MacDuff J entered summary judgment for the whole debt. The customer appealed, contending that his cross-claim survived the Settlement Agreement and could defeat or reduce the company’s claim.

The central questions were whether the cross-claim had a real prospect of success, whether the Settlement Agreement extinguished it, and whether it remained available as a set-off.

1. Appeal dismissed. The Settlement Agreement excluded any right to set off the alleged cross-claim against the acknowledged debt. IG Index was therefore entitled to the judgment sum awarded by MacDuff J. The counterclaim had not, however, been dismissed and could be pursued separately.

2. A cross-claim capable of operating as an equitable set-off remains an independent cross-claim. Set-off is a defence, whereas a counterclaim may be pursued as a free-standing claim. The existence of the former characteristic does not eliminate the latter.

3. The alleged contractual and statutory claims raised questions concerning the scope of IG Index’s duty, causation, avoidable loss, contributory negligence and quantum. Those matters required fuller consideration than was possible on summary determination. The customer therefore remained free to pursue the counterclaim unless the Settlement Agreement had extinguished it.

4. Equitable set-off may include unliquidated claims. It applies where cross-claims are so closely connected with the claimant’s demands that enforcement without considering them would be manifestly unjust. Where it applies, only the net balance is legally payable.

5. Construed as a whole, the Settlement Agreement excluded set-off. It irrevocably acknowledged that the entire debt was due and prescribed the amount, mechanics and timing of payments. Those terms addressed both liability and cash flow and required payment without deduction for the cross-claim.

6. The Agreement did not extinguish the underlying cross-claim. It contained no general release, and the claim had not been asserted or apparently contemplated when the Agreement was made. An obligation to pay the agreed instalments was compatible with later pursuit of an unliquidated damages claim. The arrangement was, in substance, “pay now and argue later”.

7. Even if the Settlement Agreement contravened the FSA Conduct of Business Rules, section 151 of the Financial Services and Markets Act 2000 provided that the contravention neither constituted an offence nor made the transaction void or unenforceable.

1. Court of Appeal (Civil Division): The customer’s appeal was dismissed. IG Index retained judgment for the whole debt, but the customer remained free to pursue his counterclaim separately.
2. Queen’s Bench Division: MacDuff J allowed IG Index’s appeal and entered summary judgment for the whole claim. No order expressly dismissed the counterclaim.
3. Master: Master Fontaine entered judgment for most of IG Index’s claim but permitted the customer to defend the balance.