Set-off rights restored – WACA overturns Forge

The recent decision of the Court of Appeal of Western Australia, Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in Liquidation) (Receivers and Managers Appointed) [2018] WASCA 163 provides much needed clarity around the law of set-off. The decision will no doubt help creditors sleep well at night, knowing that when contracting with counterparties that later become insolvent they will not lose their set-off rights for a lack of mutuality where the counterparty has granted security over its assets.

Back in 2017, Tottle J of the Supreme Court of Western Australia held that mutuality, and therefore the right of set-off, was effectively lost by reason of the grant of security. You can read our discussion of that decision here.