The Telfords and Canadian Stanley exchanged parcels of land, each giving the other a mortgage.
Canadian Stanley assigned its mortgage from the Telfords to the Holts without notifying the Telfords.
When the Holts sued the Telfords for the mortgage debt, the Telfords sought to set-off the amount Canadian Stanley owed them on the reciprocal mortgage.
The Supreme Court of Canada held that while legal set-off was unavailable due to the assignment destroying mutuality, equitable set-off applied because the two mortgages arose from the same closely interrelated land exchange transaction.
The Court allowed the appeal and permitted the set-off.
