Paul Bugden, Bugden + Co., London

Ref: Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40

A refusal by a carrier to carry further or indeed at all absent compliance with a demand for payment or further payment or some other renegotiation of the contract terms or the exercise by a carrier of a lien accompanied by a demand for payment or further payment are typical and, it has to be said, not infrequently encountered examples of cases which raise the doctrine of (economic) duress.

In more general circumstance duress may arise in all walks of like; as where a defendant uses his knowledge of criminal activity by the claimant or a member of the claimant’s close family to obtain a personal benefit from the claimant by the express or implicit threat to report the crime or initiate a prosecution. Another circumstance is where the defendant, having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and thereby forces the claimant to waive his claim.

In the criminal law it has long been accepted that the fact that the action threatened may be legal or even morally desirable does not prevent it from being blackmail. For instance, a demand for money accompanied by a threat to reveal to the victim’s employer that they have been stealing from the company will almost certainly be blackmail, although most would consider that telling the employer is the right thing to do. It is the use of the threat to gain money which will usually lead to it being considered unwarranted and as such a crime.

The application of the remedy in the civil law is often clear enough where the demand is supported by threats of otherwise manifestly unlawful or even indeed illegal acts; as in say cases amounting to blackmail but far less so in other cases where the threat is as to a lawful act which is not otherwise tortious or in breach of contract.  Fortunately, the nature and elements of the doctrine of duress in English law and the existence of a remedy in cases of lawful act economic duress have recently received the close attention of the UK Supreme Court in a case which has considerable interest to carriage of goods lawyers.

The Supreme Court judgment comprised of two speeches, one majority decision given by Lord Hodge and one further speech by Lord Burrows. There was a wide degree of agreement between Lord Hodge and Lord Burrows on various elements of doctrine, although the ultimate conclusion that the appeal be dismissed was reached via slightly different means.

Their Lordships were however all agreed on the existence of the concept of lawful act duress in English law as a ground for rescinding a contract or recovering in restitution non-contractual payments for three main reasons.  First, in earlier decisions of the House of Lords, the required duress was said to be required to be merely illegitimate rather than unlawful. Second, that the crime of blackmail includes threats of lawful action and thus it would very odd for the civil law of duress not to include threats of lawful acts when the criminal law of blackmail does so. Third, there had been several cases in the lower courts in which it had been accepted that threats of lawful action should entitle the threatened party to rescind a contract made under duress or to have the restitution of non-contractual payments.

As to the requisite elements of the remedy of lawful act economic duress the Supreme Court confirmed that there were essentially three elements to it; namely firstly, a threat (or pressure exerted) by the defendant that is illegitimate, secondly that that illegitimate threat (or pressure) caused the claimant to enter into the contract or do some other act and thirdly, that the claimant must have had no reasonable alternative to giving in to the threat (or pressure).

Where their Lordships disagreed was as to the approach in defining an ‘illegitimate threat or pressure’ and the extent to which the defendant must be shown to be acting in good faith in making a demand. Lord Burrows’ view was that a limited concept of ‘bad faith’ in a demand was essential for duress to be established. In his Lordship’s view the alternative focus on the defendant’s conduct being ‘unconscionable’ (as proposed by Lord Hodges in the majority judgment) might permit the remedy of lawful act economic duress to create considerable uncertainty in the realm of commercial contracts. In practice the difference between the two approaches may be thought in almost all cases to be wafer thin.