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Illegitimate Pressure

Last updated: 28-Nov-2015

In Pao On v Lau Yiu Long [1980] AC 614 Lord Scarman said:

Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observation of Kerr J. in The Siboen and the Sibotre [1976] 1 Lloyd’s Rep. 293 at p. 336 that in a contractual situation commercial pressure is not enough. There must be present some factor "which could in law be regarded as a coercion of his will so as to vitiate his consent": loc. cit. This conception is in line with what was said in this Board’s decision in Barton v Armstrong [1976] A.C. 104 at p. 121 by Lord Wilberforce and Lord Simon of Glaisdale – observations with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are, as was recognised in Maskell v Horner [1915] 3 K.B. 106, relevant in determining whether he acted voluntarily or not.

In Universe Tankships v ITF [1983] 1 AC 366, at 385 per Lord Diplock:

The use of economic duress to induce another person to part with property or money is not a tort per se; the form that the duress takes may, or may not, be tortious. The remedy to which economic duress gives rise is not an action for damages but an action for restitution of property or money exacted under such duress and the avoidance of any contract that had been induced by it; but where the particular form taken by the economic duress used is itself a tort, the restitutional remedy for money had and received by the defendant to the plaintiff’s use is one which the plaintiff is entitled to pursue as an alternative remedy to an action for damages in tort. In extending into the field of industrial relations the common law concept of economic duress and the right to a restitutionary remedy for it which is currently in process of development by judicial decisions, this House would not, in my view, be exercising the restraint that is appropriate to such a process if it were so to develop the concept that, by the simple expedient of " waiving the tort", a restitutionary remedy for money had and received is made enforceable in cases in which Parliament has, over so long a period of years, manifested its preference for a public policy that a particular kind of tortious act should be legitimised in the sense that I am using that expression.

Per Mance J in Huyton SA v Peter Cremer GmbH & Co [1998] EWHC 1208 (Comm):

I accept that an agreement which appears on its face to involve a compromise may be shown to have been induced by and be voidable for duress. The duress may involve illegitimate pressure, consisting in the non-performance or threat of non-performance of an obligation the existence of which was apparently the subject of the compromise. The party asserting duress will have however also to show on the facts that the illegitimate pressure was at least a significant cause inducing it to enter the contract. Concurrent or contemporary protests that illegitimate pressure led to that party entering the agreement may be of considerable relevance in this latter respect - although neither sufficient nor essential. But absent duress, I see no basis on which an apparent compromise may be ignored on the ground that one party did not really intend to compromise. Contract is objective. If, objectively, an agreement was reached on terms involving a compromise of opposing contentions, the agreement should be upheld, despite any concurrent protest or manifestation of subjective dissatisfaction about the circumstances in which the agreement came to be made - unless the agreement is voidable for causative duress.

In older authorities, relief against economic duress was said to require illegitimate pressure coercing the innocent party’s will and vitiating consent (cf The Siboen and The Sibotre at p.336 and Pao On v. Lau Yiu Long at p.635). Lord Goff in The Evia Luck doubted whether it was helpful to speak in such terms, and referred to McHugh J.A’s comments to that effect in the Crescendo case. The approach there adopted by McHugh J.A., at p.45, was based on statements by the House of Lords in DPP v Lynch [1975] A.C. 653, to the effect that, in cases of duress, "the will [is] deflected, not destroyed". Even on this more generous formulation, a simple enquiry whether the innocent party would have acted as he did "but for" an actual or threatened breach of contract cannot, I think, be the hallmark of deflection of will.

Whether because the specific ingredients identified by Lord Goff should be interpreted widely or because it is implicit in the flexibility of Lord Goff’s formulation and the underlying rationale of the law’s intervention to prevent unconscionability, relief must, I think, depend on the court’s assessment of the qualitative impact of the illegitimate pressure, objectively assessed. It is not necessary to go so far as to say that it is an inflexible third essential ingredient of economic duress that there should be no or no practical alternative course open to the innocent party. But it seems, as I have already indicated, self-evident that relief may not be appropriate, if an innocent party decides, as a matter of choice, not to pursue an alternative remedy which any and possibly some other reasonable persons in his circumstances would have pursued.

Relief may perhaps also be refused, if he has made no protest and conducted himself in a way which showed that, for better or for worse, he was prepared to accept and live with the consequences, however unwelcome. Factors such as these are referred to as relevant to relief against duress in both The Siboen and The Sibotre and Pao On, although in some contexts it may also be possible to rationalise them by reference to other doctrines such as affirmation or estoppel. The emphasis, now to be discarded, in such cases on coercion of will does not, it seems to me, mean that such factors are no longer relevant. Taking, for example, Pao On, the complainant there was able, in the face of the illegitimate pressure, to consider its position, to take alternative steps if it wished, and to decide, as it apparently did (and however wrongly with hindsight), that the substitute arrangements proposed were of no real concern or risk to it and that it was preferable to agree to them, rather than become involved in litigation. Although there would have been no re-negotiation at all "but for" illegitimate pressure, the relationship between the illegitimate pressure applied and the substitute arrangements made was not of a nature or quality, or sufficiently significant in objective terms in deflecting the will, to justify relief. Examination of the same relationship may also involve taking into account the extent to which the party applying illegitimate pressure intended or could reasonably foresee that pressure which he applied would lead to the agreement or payment made, or at least the extent to which factors extraneous to that party played any important role.

In DSND Subsea Ltd v Petroleum Geo Services Asa [2000] EWHC 185 (TCC) per Dyson J at para 131:

The ingredients of actionable duress are that there must be pressure,

(a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim,

(b) which is illegitimate, and

(c) which is a significant cause inducing the claimant to enter into the contract: see Universal Tanking of Monrovia v ITWF [1983] AC 336, 400B-E, and The Evia Luck [1992] 2 AC 152, 165G.

In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.

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