“it extended to any case where the persons entering into the undertaking were in substance influenced by the desire to prevent the prosecution or possibility of prosecution of the person implicated, and were known and intended to have been so influenced by the person in whose favour the undertaking was given.”
“In the view of the Board James Henry Ting’s failure to provide any assistance to the liquidators; his opposition to the scheme; and his resort to forgery and false evidence in order to further that opposition amount to unconscionable conduct on his part. … [B]y agreeing to withdraw the opposition to the scheme James Henry Ting did no more than he should have done from the outset, had he acted in good faith rather than in an attempt to avoid responsibility for his conduct of the affairs of Akai Holdings Ltd.”
“It is also clear that a past unlawful act, as well as the threat of a future unlawful act can, in appropriate circumstances, amount to ‘illegitimate pressure’.”
“Whilst the arbitrators did not expressly find that the owners were in bad faith in what they did thereafter, it is clear that the arbitrators took the view that the owners had manoeuvred the charterers into the position they were in, following the breach, in order to drive a hard bargain. The charterers had no realistic practical alternative but to submit to the pressure …”
“As I have already said, the pressure created by the owners in their demand for a waiver of rights by the charterers has to be seen both in the light of their repudiatory breach and in the light of their subsequent conduct, including their deliberate refusal to comply with the assurances they had previously given about providing a substitute vessel and paying full compensation in respect of that breach. Their refusal to supply the substitute vessel to meet the charterers’ needs, in circumstances which they had created by their breach and their subsequent misleading activity, unless the charterers waived their rights, could readily be found by the arbitrators to amount to ‘illegitimate pressure’. In my judgment, not only was that a finding which the arbitrators could properly reach when applying the correct test in law, … it was the right decision on the facts of this case.” (Emphasis added)
“out of the various means by which consent may be obtained - advice, persuasion, influence, inducement, representation, commercial pressure - the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion. In this the law, under the influence of equity, has developed from the old common law conception of duress - threat to life and limb - and it has arrived at the modern generalisation expressed by Holmes J - ‘subjected to an improper motive for action’ - Fairbanks v Snow, 13 NE Reporter 596, 598.” (Emphasis added)
“It is a rationale similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted under colour of office, or under undue influence or in consequence of threats of physical duress.” (Emphasis added)
“Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct.” (Emphasis added)
“where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice, a Court of Equity will set aside the transaction.”
“All that is not prohibited is permitted and there is no general doctrine of abuse of rights. If therefore a person is permitted to do something, he will generally be allowed to do it for any reason or for none. In the context of contractual negotiations this position enables people to know where they stand and provides certainty as to what is acceptable conduct in the bargaining process but it does leave many forms of socially objectionable conduct unchecked. Again, this is soundly based for judges should not, as a general rule, be the arbiters of what is socially unacceptable and attach legal consequences to such conduct.”
“It is not ordinarily duress to threaten to do that which one has a right to do, for instance to refuse to enter into a contract or to terminate a contract lawfully. In the cut-and-thrust of business relationships various types of pressure may be brought to bear in differing situations. … [A] contracting party will not be permitted to escape from its contractual obligations merely because it was coerced into making a contract by fear of the financial consequences of refusing to do so. Although this approach leaves many forms of socially objectionable conduct unchecked, as a general rule the determination of when socially objectionable conduct which is not in itself unlawful should be penalized is for the legislature rather than the judiciary.”
“The general reluctance of courts to recognise lawful economic or commercial threats as disproportionate to commercial goals (and thus illegitimate) is to be applauded. Any other approach would cut across the statutory competition law rules which draw complex distinctions between lawful and unlawful commercial behaviour. … Only in the most exceptional circumstances, if at all, should it be illegitimate to threaten to engage in conduct which a plaintiff has a right to engage in and which is not proscribed by competition law. However, where the threatened conduct is non-commercial in nature, such as threats to publish information or threats to foster rumours about a company, a finding that the threat is disproportionate and therefore illegitimate may be more readily made.”
“he was entitled to act in his own self-interest, even if his actions were both unexpected and ungenerous.”
“whether the promisee has taken unfair advantage of inequality of bargaining power”
“(1) A threat is improper if (a) what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property, (b) what is threatened is a criminal prosecution, (c) what is threatened is the use of civil process and the threat is made in bad faith, or (d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.” (Emphasis added)
“The fact that the defendants were in a monopoly position cannot therefore by itself convert what is not otherwise duress into duress.”
“[Gallaher’s] motive in threatening withdrawal of credit facilities was commercial self-interest in obtaining a sum that they considered due to them”
“The aim of our commercial law ought to be to encourage fair dealing between parties. But it is a mistake for the law to set its sights too highly when the critical enquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable”
“Outside the field of protected relationships, and in a purely commercial context, it might be a relatively rare case in which ‘lawful act duress’ can be established. And it might be particularly difficult to establish duress if the defendant bona fide considered that his demand was valid. In this complex and changing branch of the law I deliberately refrain from saying ‘never’. But as the law stands, I am satisfied that the defendant’s conduct in this case did not amount to duress.”
“If the claimants could have shown that when the defendants made their threat they knew that the goods were at the defendants’ risk, then the claimants would surely have succeeded, for the money would then have been extorted from them, and commercial self-interest is not unbridled.”
“In my view, CTN Cash and Carry Ltd v Gallaher … can be taken to establish that where A uses lawful pressure to induce B to concede a demand to which A does not bona fide believe itself to be entitled, B’s agreement is voidable on grounds of economic duress.”
“If Gallaher had made its demand in bad faith, not believing it to be well founded, the court would have held the payment to have been made under duress.” (Emphasis added)
“[U]nder the accounting system … an agent was obliged to pay all the fare applicable into the BSP which collates all sales and ticketing done through the booking system and produces a report on a weekly basis. The BSP is designed to facilitate and simplify the selling, reporting and remitting procedures of IATA Accredited Passenger Sales Agents and to ensure that there is a definitive accounting between the agent and the carrier. IATA collected ticket revenue by direct debit through the BSP system. I note that the claimants’ claims … are all based on figures derived from the BSP …”
“In consideration for [the Agent Productivity Scheme] 1 July to31 December 2012 as set out in Appendix I it is agreed that: (1) The aforesaid scheme supersedes, nullifies, voids and replaces any and all previous incentive arrangements made or binding as between PIAC, its directors, officers and employees and the Agent and/or anybody representing the Agent of any nature whatsoever and howsoever arising. (2) The Agent hereby agrees to release and discharge PIAC, its directors, officers and employees from any and all claims, costs, liabilities or actions of any nature whatsoever and howsoever arising which have, may now or in the future arise from, or otherwise be connected in any way whatsoever with any commission or remuneration, or the calculation of the amount of any commission or remuneration, due to the Agent from PIAC on any basis other than as set out in the New Agreement.”
“PIAC considered (wrongly, as I have held, but I have no reason to doubt that PIAC genuinely believed it to be true) that the 9% Basic Commission had ceased to be payable, having been replaced by Net Sales Remuneration in October 2010.” (2) The ORC claim Warren J held that TT was not entitled to succeed on the ORC claim (ie after30 June 2008 , TT was not entitled to ORC) (see[2017] EWHC 1367 (Ch) at paras 223-224). Nevertheless, the claim was, on the part of TT, “genuine and arguable” (para 260(v)). (3) The YQ commission claim (prior to October 2010) Warren J thought that the (relatively trivial) YQ claim for the period prior to October 2010 was very strong and that TT would have been entitled to summary judgment on it (see[2017] EWHC 1367 (Ch) at paras 224, 260(v), 262(i)). As regards YQ commission for the period after October 2010, TT would also have had to succeed on its claim to 9% basic commission (which, as we have seen, it would have done). But even in respect of the YQ claim for the period prior to October 2010, Warren J did not find that PIAC had acted in bad faith. In para 262, Warren J said the following: “(i) The case concerning YQ at least prior to October 2010 was very strong. I feel confident that summary judgment would have been given. PIAC ought to have paid 9% commission on the YQ element in respect of the periods prior to October 2010 before the New Agreement was signed. … (ii) Whether PIAC has acted in good faith or bad faith is moot. The Claimants have not established that there was bad faith but nor has PIAC established good faith. It is clear to me that the whole basis on which the Notice was served and the terms of the New Agreement were formulated was to ensure that agents would lose their claims to accrued rights in a situation where some of those rights (in particular, 9% commission on YQ) were clear. Indeed, Mr Schama accepted that this was the motivation for the Notice. Whether this demonstrates bad faith is a matter on which different minds might take different views.”
“[I]t is now accepted that economic pressure may be sufficient to amount to duress [which would entitle a party to avoid a contract] provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff to enter into the relevant contract …”
“Can lawful pressures also count? This is a difficult question, because, if the answer is that they can, the only viable basis for discriminating between acceptable and unacceptable pressures is not positive law but social morality. In other words, the judges must say what pressures … are improper as contrary to prevailing standards. That makes the judges, not the law or the legislature, the arbiters of social evaluation.”
“[D]espite the recent explicit recognition that a lawful threat can still be an illegitimate threat for economic duress, the better view is that only unlawful threats should suffice. A lawful threat may still result in restitution, but only … if the more stringent test of unconscionability is satisfied. This ensures that the law does not intervene unacceptably in commercial markets. Where a defendant has obtained a benefit as a result of an unlawful threat which caused the benefit to be transferred, it is appropriate for restitution to be awarded. Where the benefit was obtained as the result of a lawful threat, it is only appropriate to award restitution where the defendant’s conduct is characterised as unconscionable …”
“[W]e suggest that the Supreme Court should jettison the concept of lawful act duress. The lack of reported cases applying the doctrine demonstrates that there would be no gap in the law if lawful act duress were abolished, and the welcome effect would be to place the law of contract on a more certain and stable footing, avoiding protracted and expensive litigation about the existence and scope of lawful act duress. Whereas the Court of Appeal in [CTN Cash and Carry Ltd v Gallaher Ltd[1994] 4 All ER 714 ] took a ‘never say never’ approach to the possibility of lawful act duress, it is to be hoped that the Supreme Court in Times Travel will be more definitive and explicitly reject such an open-ended doctrine.”
“[First, the] vagueness inherent in the terms ‘economic duress’ and ‘illegitimate pressure’ can be avoided by treating the concept of ‘duress’ as limited to threatened or actual unlawful conduct … Secondly, if the conduct or threat is not unlawful, the resulting agreement may nevertheless be set aside where the weaker party establishes undue influence (actual or presumptive) or unconscionable conduct based on an unconscientious taking advantage of his or her special disability or special disadvantage … Thirdly, where the power to grant relief is engaged because of a contravention of a statutory provision such as section 51AA, section 51AB or section 51AC of the Trade Practices Act, the Court may be entitled to take into account a broader range of circumstances than those considered relevant under the general law.”
“It is, however, in my view crucial … to identify the rationale of this development of the common law. It is not that the party seeking to avoid the contract which he has entered into with another party, or to recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded. The rationale is that his apparent consent was induced by pressure exercised upon him by that other party which the law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind.”
“A person is guilty of blackmail if, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces; and for this purpose a demand with menaces is unwarranted unless the person making it does so in the belief - (a) that he has reasonable grounds for making the demand; and (b) that the use of the menaces is a proper means of reinforcing the demand.”
“The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress can, of course, exist even if the threat is one of lawful action: whether it does so depends upon the nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful, eg to report criminal conduct to the police. In many cases, therefore, ‘What [one] has to justify is not the threat, but the demand ...’: see per Lord Atkin in Thorne v Motor Trade Association[1937] AC 797 , 806.”
“Equity identified broadly two forms of unacceptable conduct. The first comprises overt acts of improper pressure or coercion such as unlawful threats. Today there is much overlap with the principle of duress as this principle has subsequently developed. The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage.” (Emphasis added)
“Illegitimate pressure must be distinguished from the rough and tumble of normal commercial bargaining.”
“The present dispute does not concern a protected relationship. It also does not arise in the context of dealings between a supplier and a consumer. The dispute arises out of arm’s length commercial dealings between two trading companies. It is true that the defendants were the sole distributors of the popular brands of cigarettes. In a sense the defendants were in a monopoly position. The control of monopolies is, however, a matter for Parliament. Moreover, the common law does not recognise the doctrine of inequality of bargaining power in commercial dealings. See National Westminster Bank Plc v Morgan[1985] AC 686 . The fact that the defendants were in a monopoly position cannot therefore by itself convert what is not otherwise duress into duress. A second characteristic of the case is that the defendants were in law entitled to refuse to enter into any future contracts with the plaintiffs for any reason whatever or for no reason at all. Such a decision not to deal with the plaintiffs would have been financially damaging to the defendants, but it would have been lawful. A fortiori it was lawful for the defendants, for any reason or for no reason, to insist that they would no longer grant credit to the plaintiffs. The defendants’ demand for payment of the invoice, coupled with the threat to withdraw credit, was neither a breach of contract nor a tort. A third, and critically important, characteristic of the case is the fact that the defendants bona fide thought that the goods were at the risk of the plaintiffs and that the plaintiffs owed the defendants the sum in question. The defendants exerted commercial pressure on the plaintiffs in order to obtain payment of a sum which they bona fide considered due to them. The defendants’ motive in threatening withdrawal of credit facilities was commercial self-interest in obtaining a sum that they considered due to them. … We are being asked to extend the categories of duress of which the law will take cognizance. That is not necessarily objectionable, but it seems to me that an extension capable of covering the present case, involving ‘lawful-act duress’ in a commercial context in pursuit of a bona fide claim, would be a radical one with far-reaching implications. It would introduce a substantial and undesirable element of uncertainty in the commercial bargaining process. Moreover, it will often enable bona fide settled accounts to be re-opened when parties to commercial dealings fall out. The aim of our commercial law ought to be to encourage fair dealing between parties. But it is a mistake for the law to set its sights too highly when the critical enquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable. That is the enquiry in which we are engaged. In my view there are policy considerations which militate against ruling that the defendants obtained payment of the disputed invoice by duress. Outside the field of protected relationships, and in a purely commercial context, it might be a relatively rare case in which ‘lawful-act duress’ can be established. And it might be particularly difficult to establish duress if the defendant bona fide considered that his demand was valid. In this complex and changing branch of the law I deliberately refrain from saying ‘never’. But as the law stands, I am satisfied that the defendants’ conduct in this case did not amount to duress.”
“The Board is of the view that in the present case the liquidators entered into the settlement agreement as the result of the illegitimate means employed by James Henry Ting, namely by opposing the scheme for no good reason and in using forgery and false evidence in support of that opposition, all in order to prevent the liquidators from investigating his conduct of the affairs of Akai Holdings Ltd or making claims against him arising out of that conduct. As the Board has already observed, by adopting these means James Henry Ting left the liquidators with no reasonable or practical alternative but to enter into the settlement agreement.”
“[A] finding of particular importance is that James Henry Ting procured the opposition to the scheme by Blossom Holdings Ltd and Costner Assets Ltd ‘solely so as to defeat [the scheme] with the desire and intention of thereby depriving the liquidators of funds with a view to preventing any further investigation of his conduct of the affairs of the company’ … In other words, James Henry Ting’s opposition was not made in good faith, but for an improper motive.”
“In the view of the Board James Henry Ting’s failure to provide any assistance to the liquidators; his opposition to the scheme; and his resort to forgery and false evidence in order to further that opposition amount to unconscionable conduct on his part … [B]y agreeing to withdraw the opposition to the scheme James Henry Ting did no more than he should have done from the outset, had he acted in good faith rather than in an attempt to avoid responsibility for his conduct of the affairs of Akai Holdings Ltd.”
“37. The only basis of the appeal put forward was that the Arbitrators had not made findings of fact which could amount to ‘illegitimate pressure’, essentially because they had not found that the pressure put upon the Charterers to enter into the settlement agreement involved an unlawful act. The Owners were not threatening to break a contract at the time nor committing any tort in refusing to enter into a variation of the charter with the substitution of the Agia and a new laycan, save on terms which bore down heavily upon the Charterers because of their existing sale contract. It was said that this was just the operation of market forces of which the Owners were entitled to take advantage. 38. The Owners contended that the Arbitrators had not found any threatened breach of contract by them, in refusing to ship the cargo on the Agia without a waiver of rights by the Charterers. It is true that the Arbitrators made no finding that there had been a binding agreement made on the 27th April to ship the cargo on the Agia, so that there could be no threatened breach in refusing to do so, without the waiver of rights. Thus far the Owners are correct. 39. What however the Owners’ submissions overlook is the fact that their repudiatory breach was the root cause of the problem and that their continuing conduct thereafter was, as described by the Arbitrators, designed to put the Charterers in a position where they had no option but to accept the settlement agreement in order to ship the cargo to China and avoid further huge losses on the sale contract to the Chinese receivers. As the Charterers submitted, it would be very odd if pressure could be brought about by a threatened breach of contract, which did amount to an unlawful act but not by a past breach, coupled with conduct since that breach, which drove the victim of the breach into a position where it had no realistic alternative but to waive its rights in respect of that breach, in order to avoid further catastrophic loss.”
“My conclusion on the central legal issue is that the doctrine of lawful act duress does not extend to the use of lawful pressure to achieve a result to which the person exercising pressure believes in good faith it is entitled, and that is so whether or not, objectively speaking, it has reasonable grounds for that belief. The common law and equity set tight limits to setting aside otherwise valid contracts. In this way undesirable uncertainty in a commercial context is reduced.”
“106. The relevant considerations go beyond uncertainty. In judging the use of lawful acts or threats of lawful acts as commercial pressure, there is a sharp distinction between such use to pursue demands made in good faith and those made in bad faith. As I earlier mentioned, a lack of good faith on the part of a contracting party is a feature in a number of the grounds on which contracts may be avoided. Rescission on grounds of fraudulent misrepresentation or unconscionable transaction are examples. It is a clear criterion involving conduct which all can agree is unacceptable and which is a fact capable of proof, often as it happens by reference to the lack of any reasonable grounds for the belief. By contrast, not only is reasonableness in this context a standard of very uncertain content but it is also very unclear why or on what basis the common law should hold that a party with a private law right, whose exercise is not subject to any overriding duty, cannot use it to achieve a purpose which is both lawful and advanced in good faith. 107. Moreover, it is relevant to note that the economic pressure that PIAC was able to apply in this case resulted from its position at that time as a monopoly supplier of tickets for direct flights between the UK and Pakistan. As I have earlier mentioned, the common law has always rejected the use, or abuse, of a monopoly position as a ground for setting aside a contract, leaving it to be regulated by statute.”
“In my judgment, a lack of reasonable grounds is insufficient to engage the doctrine of duress where the pressure involves the commission or threat of lawful acts.”
“The judge accepted that Times Travel had not established bad faith. That should have been the end of the discussion of good or bad faith. It was not for PIAC to establish its good faith.”
“If the claimants could have shown that when the defendants made their threat they knew that the goods were at the defendants’ risk, then the claimants would surely have succeeded, for the money would then have been extorted from them, and commercial self-interest is not unbridled.”
“CTN Cash and Carry v Gallagher can be taken to establish that where A uses lawful pressure to induce B to concede a demand to which A does not bona fide believe itself to be entitled, B’s agreement is voidable on grounds of economic duress.”
“However, if entitlement is used in a legal sense, then the language of this test does not quite work in the contractual context. The demand will be to receive a contractual promise. Unless issues of public policy are engaged, a party is always legally entitled to receive a contractual promise, even if that is a waiver of a prior claim. This is illustrated by Times Travel itself: the point was not whether the defendant bona fide believed itself to be entitled to the thing demanded (the obligations under the new agency agreement) but rather whether the defendant actually believed there was a prior claim against it for past unlawfulness (for not paying commissions due under the old agency agreement). Since the airline had genuinely believed itself not to be liable to pay the commissions under the old agreement, the waiver of that claim in the new agreement could not be rescinded for duress.”
“the test suggested in Chitty on Contracts could be made more precise by transposing into objective requirements the elements of the offence of blackmail. On this basis a demand coupled with a threat to commit a lawful act will be regarded as illegitimate if (a) the defendant has no reasonable grounds for making the demand and (b) the threat would not be considered by reasonable and honest people to be a proper means of reinforcing the demand.”
“care must be taken in treating threats lawful in themselves as amounting to duress, for otherwise threats commonly used in business (eg of lawful strikes) would fall into the category of economic duress.”
“disproportionality between (i) the lawful threat and (ii) the defendant’s legitimate interest in the demand it supports.”
“The general reluctance of courts to recognise lawful economic or commercial threats as disproportionate to commercial goals (and thus illegitimate) is to be applauded. Any other approach would cut across the statutory competition law rules which draw complex distinctions between lawful and unlawful commercial behaviour ... Only in the most exceptional circumstances, if at all, should it be illegitimate to threaten to engage in conduct which a plaintiff has a right to engage in and which is not proscribed by competition law.”