The recent decision of the Ontario Superior Court of Justice
reinforces that handing over a cheque to pay for services amounts
to an irrevocable promise to pay for those services. In CBC v.
iSport Media and Kevin Albrecht ("CBC v.
iSport"), the Court confirmed that an equitable set-off
defence is not generally available to a person who issues a
cheque.1 The case offers reassurance for businesses who
accept payment by cheque that the writer of a dishonoured cheque
will struggle to resist or delay judgment against them for the
amount of the cheque.
CBC entered into a contract with Insight under which CBC agreed
to produce and broadcast curling events for a fee and Insight
obtained advertising and other rights for the broadcasts. Insight
later assigned its rights and obligations under the contract to
iSport Media and Management Ltd. ("iSport").
iSport paid CBC's fee by four post-dated cheques, two of
which were dishonoured due to non-sufficient funds (the "NSF
Cheques"). CBC terminated the agreement and sued iSport for
full payment under the contract.
CBC moved for summary judgment for the amount of the NSF Cheques
without the need for a trial. iSport defended on the basis of the
defence of equitable set-off. In other words, iSport claimed that
CBC owed to it amounts that exceeded the total amount of the NSF
Cheques, and that any amounts CBC owed to iSport should be
subtracted or "set-off" from the amount iSport owed CBC
for the NSF Cheques. Accordingly, iSport argued that whether CBC
was entitled to be paid for the amount of the NSF Cheques could
only be determined once all of the issues were resolved at
Equitable Set-Off is Not Available, Even in Domestic
The Ontario Superior Court of Justice held that iSport could not
rely on an equitable set-off defence. In doing so, it affirmed the
Ontario Court of Appeal decision in Iraco Ltd. v. Staiman Steel
Ltd., where the Court held that equitable set-off does not
apply to bills of exchange.2
The Court held that equitable set-off is prohibited by s. 94(2)
of the Bills of Exchange Act ("BEA").
That section provides that where a bill of exchange, such as a
cheque, is "dishonoured by non-payment, the holder of the
cheque has an immediate right of recourse against the issuer of the
cheque."3 The BEA provides no exceptions.
iSport argued that equitable set-off should nonetheless apply
for four reasons: (i) the rule against equitable set-off only
applies in international disputes; (ii) iSport received no
consideration in exchange for the payment to be made by NSF
Cheques; (iii) the NSF Cheques were post-dated and CBC had not
provided services at the time the NSF Cheques were written; and
(iv) CBC's performance under the contract was deficient.
The Court held equitable set-off is not available regardless of
whether the dispute arises from a domestic or international
transaction. With regard to the consideration argument, equitable
set-off could have been available if CBC had provided no services
at all to iSport; however, iSport conceded that CBC had provided
some services for which the NSF Cheques were intended as payment.
The Court further held that the fact that the cheques were
post-dated was irrelevant – it mattered only that iSport
provided the NSF Cheques to CBC. Finally, the Court held that while
CBC's alleged performance deficiencies could form the basis of
a counterclaim, it was not a reason to permit iSport to raise a
set-off defence. Accordingly, the Court granted CBC judgment in the
amount of the NSF Cheques.
Cheques are (Nearly) Equivalent to Cash
This case affirms that the writer of a dishonoured cheque cannot
rely on equitable set-off, regardless of whether it is raised in a
domestic or international dispute. Instead, the holder of the
cheque is entitled to treat it as cash in that, except where there
is a complete failure to provide the goods or services in exchange
for which the cheque is provided, the delivery of a cheque amounts
to an irrevocable promise to pay. Of course, if the writer of the
cheque has no money in the account upon which the cheque is drawn,
the fact that judgment on the cheque can be obtained without delay
may be of little comfort to a business that has accepted payment by
cheque. Therefore, as a practical matter, it remains prudent to
require payment by certified cheque or bank draft (or cash), where
the creditworthiness of a customer is questionable.
1. CBC v. iSport Media and Kevin Albrecht.
 ONSC 1905.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
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