10. What should I do if the plaintiff owes me money, and I want to use that amount to reduce or defeat his claim against me and even seek compensation from him?

If the plaintiff owes you money or is liable to you for losses, you should consider both set-off and a counterclaim, depending on what you want the court to do.

Set-off: reducing or defeating the plaintiff’s claim

Set-off allows you, as the defendant, to argue that even if the plaintiff has a claim against you, the amount he claims should be reduced or cancelled because the plaintiff also owes you money. In other words, you ask the court to take account of your own claim against the plaintiff when deciding how much, if anything, you owe. If your loss is equal to or greater than the plaintiff’s proved claim, the set-off can reduce that claim to zero.

For example, if the plaintiff claims that you owe him $10,000, but you say the plaintiff caused you losses of $7,000, you may plead set-off and argue that the plaintiff can only recover $3,000. If your loss is equal to or greater than the plaintiff’s claim, set-off may reduce the claim to zero.

Set-off may be available where your claim is closely connected to the plaintiff’s claim, or where the law otherwise permits mutual debts or liabilities to be balanced against each other. The precise requirements depend on the type of set-off relied upon and the applicable court rules.

Because a set-off is only a defence, it cannot result in you recovering any money from the plaintiff beyond defeating his claim. Furthermore, if the plaintiff’s action is stayed or dismissed, the set-off also ends.

Counterclaim: seeking compensation from the plaintiff

If you want the court not only to reduce or defeat the plaintiff’s claim, but also to order the plaintiff to pay you compensation, you should also consider bringing a counterclaim.

A counterclaim allows you, as the defendant, to make your own claim against the plaintiff in the same proceedings. Instead of only defending yourself against the plaintiff’s claim, you ask the court to decide that the plaintiff owes you money, damages, or another remedy.

For example, if the plaintiff claims $10,000, but you say the plaintiff caused you $15,000 in losses, you may plead set-off to defeat the plaintiff’s claim and bring a counterclaim for the whole $15,000.

A counterclaim is generally treated as an independent action brought by the defendant against the plaintiff. Because it has the characteristics of a separate lawsuit, it is not necessarily limited to the facts or incidents pleaded in the plaintiff’s statement of claim.

When you bring a counterclaim, you remain the defendant in the original claim, but you are treated like a plaintiff for the purposes of your counterclaim. The original plaintiff must then respond to your counterclaim, usually by filing a defence to counterclaim within 28 days after the service of the counterclaim. If the plaintiff fails to respond to your counterclaim, you may be able to apply for default judgment, depending on the nature of the claim and the applicable court rules.

All facts relied upon for the counterclaim must be stated under the specific heading “Counterclaim”. Your counterclaim and any particulars must be verified by a statement of truth.

Key differences between set-off and counterclaim

Set-off and counterclaim are related but different:

Set-off is used as a defence to reduce or extinguish the plaintiff’s claim.
Counterclaim is your own separate claim against the plaintiff and can result in a judgment in your favour.
In many cases, the same facts may support both a set-off and a counterclaim.

In short, if you only want to reduce or defeat the plaintiff’s claim, set-off may be enough. If you also want the plaintiff to be ordered to pay you compensation, you should consider bringing a counterclaim as well.