Chapter 8 Updates to the Law

Duress
Untitled Document

Chapter 8: Duress

8.6.2 Lawful Pressure that is illegitimate

p. 336 on application to the commercial context

Times Travel (UK) Ltd and another v Pakistan International Airlines Corporation [2017] EWHC 1367 (Ch)

The two claimant travel agents (mainly selling tickets to their local Pakistani communities) brought a claim against the defendant airline (the sole operator of direct flights between the UK and Pakistan) alleging that it had pressured them into entering into agency agreements. In 2011, other agents in a trade association began litigation against the airline in respect of unpaid commission owing. In 2012, the airline sent the claimants notice of termination and reduced their ticket allowances. Following discussions with the defendant, the claimants entered into new agreements which restored their ticket allocations and released the airline from any claims arising from commission otherwise than under the new agreement. The claimants alleged that they entered the new agreement under:

  1. economic duress and/or
  2. misrepresentation (the defendant had promised them certain commission payments or incentives which never materialised). They further alleged that the defendant’s promises regarding commission/incentives amounted to a collateral contract.

On economic duress, the Warren J found:

  1. Lawful conduct can amount to economic duress (citing Chitty with approval).
  2. The applicable test for causation is ‘but for’ (but note that the court later described the duress as a ‘significant cause’). Addressing the argument that the claims in misrepresentation and economic duress could not co-exist as both require ‘but for causation’ (ie if the threats caused the Claimants to enter into the contract, they couldn’t have entered into the contract in reliance on the misrepresentation, and vice versa): Warren J rejected the misrepresentation claim so the issue did not arise, but he suggested that, as the misrepresentation and threats arose out of ‘single course of conduct’ on the part of the Defendant, ‘It is arguable that it is not open to PIAC to rely on one wrong to defeat the Claimants' claim based on the other wrong by arguing that the necessary "but for" test is not fulfilled by either of those wrongs separately when, cumulatively, it clearly is fulfilled.’ [258]
  3. The factors elucidated by Dyson J in DSND Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530 at [131] on economic duress were adopted and applied:
    1. the case against the defendants on the issue of unpaid commission was very strong such that summary judgment was likely to have been granted;
    2. whether the defendant acted in good or bad faith is moot;
    3. the defendant gave no ‘adequate period of notice’ to allow the claimant to adjust its business;
    4. one claimant had no practical alternative; and
    5. one claimant protested at the time
  4. On the facts, a claim in economic duress was established for one of the claimants

This decision is currently being appealed, although it hasbeen cited with approval in Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Ioannis Kent (AKA John Kent) [2018] EWHC 333 (Comm) at [187] (in the context of blackmail/threat of physical violence)
It has been suggested that, given that (lawful) exercise of the right to terminate the contract followed original (unlawful) withholding of commission, this case is better seen as an instance where a ‘lawful threat may render a contract voidable because it is inextricably linked to previous unlawful conduct’ (Davies and Day L.Q.R. 2018, 134(Jan), 5-10 at p. 9-10)