The bank lent US$27m to Garuda to purchase an aircraft. Garuda repaid US$10m of the principal early. The bank charged Garuda a break cost fee which Garuda paid.
Garuda later went into default and the aircraft was sold with a shortfall. The bank sued the guarantor who argued that the bank was not entitled to the break cost fee that Garuda had paid and that the judgment against the guarantor ought to have been reduced accordingly.
The Court of Appeal held that if Garuda had raised the defence (of having paid break costs that were not owing) it would amount to a set off and as there was a no set off clause if would not be allowed to.