Dold v Murphy
[2020] NZCA 313
•31 July 2020 at 9.30 am
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| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA301/2019 [2020] NZCA 313 |
| BETWEEN | ROGER MURRAY LORIMER DOLD |
| AND | PETER JAMES MURPHY |
| Hearing: | 24 April 2020 |
Court: | Kós P, Clifford and Collins JJ |
Counsel: | N R Campbell QC and K B Dillon for Appellants |
Judgment: | 31 July 2020 at 9.30 am |
JUDGMENT OF THE COURT
ALeave to amend the appellants’ claim is denied.
BThe appeal is dismissed.
CThe respondents are entitled to costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Kós P)
Roger Dold, Chris Jacobs and Peter Murphy owned a Queensland-based tourism company called Cruise Whitsundays Pty Ltd. Their ownership was beneficial rather than direct, but that detail need not detain us here. In effect, Mr Dold and Mr Jacobs each held 46.9 per cent; Mr Murphy, who had been their solicitor, held 6.2 per cent.
The three were interested in selling Cruise Whitsundays. A third party, Quadrant Private Equity, made an exceptionally lucrative offer of AUD 110 million for the whole shareholding in Cruise Whitsundays. This was far more than expected, and they were keen to sell. With encouragement from Mr Murphy, they managed to get Quadrant’s offer increased to AUD 112 million.
But Mr Murphy then insisted he receive more for his shares. Unless he got another AUD 5 million from Mr Dold and Mr Jacobs, he would not sell his shares to Quadrant. Eventually he settled for AUD 4 million, and the sale proceeded. In effect, he insisted on being treated as if his shareholding was 9.8 per cent, rather than 6.2 per cent.
Now Mr Dold seeks to recover the AUD 2 million he paid Mr Murphy to get him to sell. He says Mr Murphy’s demand was unlawful, either being in breach of the shareholders’ agreement, in breach of fiduciary duty, or economic duress.
Edwards J did not agree.[1] She said Mr Murphy could keep the extra money. Mr Dold appeals.
Background
[1]Dold v Murphy [2019] NZHC 1232 [High Court judgment].
To begin with, Mr Dold, Mr Jacobs and a Mr Simm each owned one-third of a ferry company, Fullers Bay of Islands Ltd. Mr Murphy was a commercial lawyer who acted for them. Amongst other things he drafted a shareholders’ agreement for them, concerning Fullers. He continued to act for them when he left Chapman Tripp and went out on his own.
In 1998 Fullers acquired 50 per cent of South Sea Cruises Ltd, a Fiji-based day cruise operator. Fullers acquired the remaining 50 per cent in 1999. In 2001 Mr Simm left the group. The shareholdings were reorganised, and Mr Murphy acquired a 6.2 per cent holding in Fullers. The other two each held 46.9 per cent. Curiously, the 1994 shareholders’ agreement, to which Mr Murphy was not a party, was not updated. But it appears to have been treated as applying, de facto.
In 2003 a new venture was established to run ferry and day cruise services in the Whitsunday Islands off the coast of Queensland. That was Cruise Whitsundays. A new company, Marine Tourism Holdings Ltd, was formed to hold the shares in Fullers, South Sea and Cruise Whitsundays. The same proportionate holdings continued. Again, the 1994 shareholders’ agreement was not updated.
In 2004 Marine Tourism Holdings sold Fullers to an unrelated third party. In 2005 a new shareholders’ agreement was prepared. It reflected the fact that Mr Murphy was a minority, rather than equal, shareholder (as Mr Simm had been). It was drafted by Mr Murphy.
In 2012 Marine Tourism Holdings sold its shares in South Sea to another unrelated, third party. Its sole remaining asset was Cruise Whitsundays, the shares of which it then distributed to Messrs Dold, Jacobs and Murphy. Marine Tourism Holdings was then liquidated. Mr Dold (through the second appellant, the Dold Trust) and Mr Jacobs each held 46.9 per cent of Cruise Whitsundays’ shares, and Mr Murphy held 6.2 per cent (through the second respondent, Luberon Nominees Ltd). Each was a working director, effectively paid an equal daily rate.
In 2012 Cruise Whitsundays purchased its principal competitor, Fantasea Cruises Pty Ltd, which substantially improved its profitability. In 2014, it began the development of a new maritime passenger terminal at Airlie, in Queensland. The plan was to build and sell it, and lease it back. Mr Jacobs was to have managed the project, but he fell ill and Mr Murphy took it over. This led to a serious disagreement in October 2014, Mr Murphy feeling underappreciated, underpaid and over in Australia all the time. Mr Dold suggested any profit from the terminal sale might be split equally three ways. Mr Murphy rejected the suggestion and ceased work on the project for a period of six months. During that time Mr Dold took sole responsibility for preparing the terminal for sale. Mr Murphy came back on board in April 2015 and managed the legal side of the terminal sale.[2]
[2]Mr Dold’s evidence was that the terminal sale profit was AUD 1,366,400. Had Mr Murphy received one-third of that, that would have amounted to AUD 455,467.
The long-term plan was to sell or float Cruise Whitsundays. Initial discussions about a possible sale began in November 2014. In December 2014 Sealink Travel Group made what Mr Dold called a “cheeky” offer of AUD 35.75 million. The offer was rejected, as was a second offer in January 2015. Mr Dold (with authority from other shareholders) indicated an expectation of AUD 60.5 million. A year later, and after some further analysis, the shareholders valued Cruise Whitsundays at up to AUD 75 million. Negotiations with Sealink stalled, and the shareholders appointed Deloitte to handle the sale in June 2016.
On 27 July 2016 an indicative offer of AUD 110 million was received from Quadrant. This was well beyond any of the shareholders’ expectations. As Mr Dold put it, “our highest anticipated sale price was [AUD] 75 million and neither Chris, Peter or I ever dreamt of getting an offer of [AUD] 110 million”. Quadrant would however require 20 to 40 per cent of the purchase price to be reinvested into the new entity.
The shareholders met with Deloitte on 3 August 2016. Mr Dold said in evidence, “We were obviously going to accept the offer”. But Mr Murphy argued Quadrant would not have put its very best offer forward first. Deloitte was asked to call Quadrant to see if it would raise its offer by AUD 2 million. Quadrant duly raised its offer to AUD 112 million, but required a memorandum of understanding to be signed on 8 August 2016.
Immediately after that meeting, Mr Murphy told Mr Dold that he would not sign the memorandum of understanding unless Messrs Dold and Jacobs paid him a further AUD 5 million between them from their sale proceeds. Later that day, the three shareholders met at an airport. Mr Dold said Mr Murphy was holding a pistol to their heads, holding them to ransom and blackmailing them. Mr Murphy acknowledged doing that.
In evidence, Mr Murphy justified his actions in these terms:
Once the Quadrant figure was known Roger raised the question of bonuses for staff and, at that point, I said I was holding my hand up also for [I], as I had flagged previously, believed that I had contributed significantly more than my 6.2% share to the increase in value that the shareholders now stood to obtain. I referred back to my emails of October 2014.
In my mind was the fact that, up until 2012 when I got involved extensively in Cruise Whitsundays’ business, that business had accumulated losses of over $20m and over the next four years, starting with buying out our competitor Fantasea Cruises, the business had built up to its apparent sale for $112m. Given the shareholders had also taken out $12m in share buy backs in the prior 12 months the value to shareholders was actually $124m.
Mr Murphy elaborated that he was happy otherwise to “sit tight” and share in the projected increase in the company’s value.
On 5 August Mr Murphy emailed the other shareholders saying, “Can I be clear that this deal will not proceed if my position is not resolved”. The following day he reduced his demand to AUD 4 million. Mr Dold acquiesced on 7 August. He wrote to Mr Murphy in these terms:
Peter,
I don’t condone your approach to this issue for one moment and I’d have to say that I am doing this under a lot of duress, but in the end you are correct - as you said, you are holding me to ransom and there is not much that I can do about [it]. So reluctantly I will agree to your claim of $2m from Chris and myself each.
The memorandum of understanding was signed on 8 August 2016. The share sale and purchase agreement with Quadrant was signed on 15 September 2016. Mr Murphy was designated the sellers’ representative in that agreement. The sale (which was of the shares in Cruise Whitsundays) was completed, and distributions made to shareholders, on 31 October 2016.
Mr Dold commenced this proceeding in December 2016.
Issues on appeal
We need in this judgment deal with only three issues:[3]
(a)Issue one: Did Mr Murphy’s demand breach the terms of the shareholders’ agreement of January 2005?
(b)Issue two:Did the demand breach a fiduciary duty owed to Mr Dold?
(c)Issue three: Did the demand (and payment) amount to economic duress?
[3]Mr Murphy also advanced a positive defence of estoppel against Mr Dold. It proves unnecessary for us to address that argument.
We observe that Mr Campbell QC — who did not appear below for the appellants — preferred to start with fiduciary duty. We prefer to start, as the Judge did, with the agreement the parties made, and then look to whether contractual obligations ought to be supplemented by fiduciary ones.
We will address the terms of the judgment as we address each issue.
Issue one: Did Mr Murphy’s demand breach the terms of the shareholders’ agreement of January 2005?
Clause 3 of the shareholders’ agreement, sets out the main operating objectives of the company. Relevantly, they are:
3.1.1foremost, to maximize shareholders’ returns on funds invested;
…
3.1.4to ensure the operations of the Group Companies are managed so as to facilitate the sale of any or all of the Group Companies and/or its business at any time and specifically within five to ten years of the date of this agreement.
Clause 3.3 controls the conduct of the “Participants”. It is common ground each of the shareholders is one. Relevantly, it provides:
3.3.1None of the Participants shall conduct its affairs or carry on its business in a manner which is inconsistent with any of the main operating objectives of the Company.
3.3.2Each Participant, Shareholder Affiliate and Director shall ensure that all business opportunities identified by them which fall within the activities contemplated either now or in the future by the Group Companies as outlined in clause 3.1 are referred to the Group Companies in the first instance.
Clause 5.4 governs matters requiring participant unanimity:
Notwithstanding the provisions of any Constitution, decisions on the following matters shall require the unanimous agreement of the Participants:
…
5.4.7the sale or other disposition of all or a substantial part of the undertaking of any Group Company;
Finally, cl 18.1 provides for confidentiality obligations:
The Participants, Shareholder Affiliates for themselves and for all Group Companies acknowledge that in the course of the Companies business each of them may acquire confidential information in relation to the business and affairs of another Participant and/or a Shareholder Affiliate. Where the Group Companies or a Participant or Shareholder Affiliate comes into possession of such confidential information then the relevant Participant, Shareholder Affiliate or the Group Companies and the Group Companies employees shall only be permitted to use such confidential information to the extent necessary to enable that Participant, Shareholder Affiliate or the Group Companies to fulfill its obligations under this agreement.
Judgment
The Judge noted the argument for Mr Dold in these terms:[4]
The plaintiffs allege that Mr Murphy failed to act in accordance with the objective of maximising shareholders’ returns in breach of cl 3.3.1 and cl 3.1.1 of the Agreement. In particular, the plaintiffs say that “Mr Murphy’s demand for AUD$4m was at the expense of the shareholding return of [Mr Jacobs] and [Mr Dold]. It reduced the returns [Mr Jacobs] and [Mr Dold] were entitled to”. The plaintiffs place particular reliance on an admission by Mr Murphy during cross-examination that his demand for AUD$4m reduced the other shareholders’ returns on their investments.
[4]High Court judgment, above n 1, at [46].
The Judge said that the existence of a contractual obligation of the kind contended for by Mr Dold did not sit easily with the plain and ordinary meaning of cl 3.1.1. That was expressed in “broad and somewhat aspirational terms”.[5] The Judge said:[6]
The clause does not govern the relationship between individual shareholders at the point of sale of their shares. Nor does it say anything about how the collective return is to be divvied up between the shareholders once the shares have been sold.
[5]At [47].
[6]At [47].
Secondly, the Judge found the construction proposed by Mr Dold to be at odds with the unanimity requirement in cl 5.4.7. As the Judge saw it, that meant each individual shareholder had the right to stipulate the terms upon which they were willing to sell their shares. Construing cl 3.3.1 to require a shareholder to subordinate personal interests in maximising returns on the sale of shares, to the interests of other shareholders, would be inconsistent with cl 5.4.7.[7]
[7]At [48].
Thirdly, the Judge held that cl 3.1.1 did not prevent Mr Murphy from stating the terms upon which he was prepared to sell his shares. The price was an extremely good one, significantly more than the previous offer made.[8]
[8]At [49]–[50].
The Judge also rejected an argument based on cl 3.1.4 of the agreement, on the basis that Mr Murphy had put the entire sale in jeopardy. The Judge found that clause also to be essentially aspirational, and did not dictate the relationship between shareholders at the point of sale.[9] As the Judge put it:[10]
Importantly, it does not oblige a shareholder to sell their shares at any particular point in time. There is nothing in this clause requiring Mr Murphy to sell his shares if the other shareholders resolved to do so.
[9]At [51]–[53].
[10]At [53].
The Judge did not deal with an allegation of breach of cl 18.1 (confidential information), because no such argument was advanced before her. Nor had it been pleaded.
Submissions
Mr Campbell advances the breach of contract argument on two planks: cls 3.3.1 and 18.1.
Mr Campbell submits the operating objectives of Cruise Whitsundays, set out in cl 3.1, included “foremost, to maximize shareholders’ returns on funds invested”. Clause 1.1.5 provided that the singular includes the plural and vice versa unless the context requires otherwise. So the first and foremost objective was not only to maximise shareholders’ collective return, but also to maximise each shareholder’s individual return. The essential argument made for Mr Dold was that Mr Murphy’s demand was inconsistent with the objective in cl 3.1.1, because while it did not affect the collective return in the shareholders, it reduced Mr Dold’s (and Mr Jacobs’) return. Mr Murphy had admitted as much in cross‑examination. Clause 3.1.1 did not merely set out a collective purpose. The Judge’s construction of cl 5.4.7 was wrong, because it applied to the sale of the undertaking, rather than the sale by shareholders of their shares. While the default position is that a shareholder is generally at liberty to decide whether or not to sell their shares, and decide the terms of that sale, cl 3.3.1 constrained that liberty. The demand made by Mr Murphy also jeopardised the sale, and was inconsistent with the objective in cl 3.1.4: cl 3.3.1 obliged each participant to refrain from conducting their affairs in a manner inconsistent with that joint sale objective.
Secondly, Mr Dold sought leave on appeal to amend his claim to add, as a further alleged breach, that Mr Murphy:
Made use of confidential information in relation to the business and affairs of Mr Dold and Mr Jacobs (namely, their wish to sell their shares to Quadrant as part of the AUD$112 million offer), which information Mr Murphy had acquired in the course of Cruise Whitsundays’ business, to make the demand of AUD$4 million from the first and second plaintiffs, Mr Jacobs and the Jacobs’ entity.
The fact Mr Dold wished to sell his shares to Quadrant was confidential in the sense that it was not publicly available, and the vendor’s desire to sell or to sell at a particular price was inherently confidential information. Mr Campbell submitted there could be no prejudice to Mr Murphy making the amendment. It is incontrovertible that Mr Murphy became aware that Mr Dold wished to sell his shares and the questions the amendment would raise are questions of law concerning the application of cl 18.1 to that information.
Discussion
We do not accept the essential premise of the contractual argument made for Mr Dold. From the standpoint of objective observers assessing meaning, we cannot infer from a combination of cls 1.1.5 (singular includes plural), 3.1.1 (primary objective of company to maximise shareholders returns) and 3.3.1 (shareholders not to conduct their affairs inconsistently with operating objectives of the company) a bar on a minority shareholder seeking a premium for the sale of his or her shares. To do so would convert those clauses into the equivalent of a “drag-along” obligation overriding the rights of that shareholder. No such clause was bargained for, and it cannot be constructed after the event. No argument was made beyond interpretation to the effect that such an obligation is implied, or that it had been intended but omitted (rectification).
The starting point, at least in contract, must be one of shareholder autonomy. Mr Campbell accepted that must be so. This was not a company to which statute‑backed compulsory acquisition rights and powers applied.[11] Accordingly, a shareholder could not be compelled to sell unless they had committed to that course by agreement. In this case, that meant the shareholders’ agreement. It was not suggested here that the shareholders’ actions in July to August 2016 gave rise to a collateral agreement to sell, or a promissory estoppel enforceable against Mr Murphy. It also meant a minority shareholder might find him or herself in the unusual but happy situation of being able to command a premium for his or her shares — either from the third party purchaser, or from other shareholders anxious to see a complete takeover (on the basis that the whole was more valuable than the sum of the individual parts).
[11]See for instance, in New Zealand, a “Code company” for the purposes of the Takeovers Act 1993.
In our view, cl 3.3.1 serves a much more limited purpose than Mr Dold now suggests. Read in context, particularly in conjunction with cl 3.3.2, it serves simply to constrain conduct of a shareholder’s “affairs or … business” in a way that does not derogate from the activities of Cruise Whitsundays. Clause 3.3.2 precludes individual exploitation of related business opportunities, and cl 3.3.1 serves a similar and related purpose.
Neither clause can be stretched into a “drag-along” obligation, compelling a minority shareholder to sell at an offered price acceptable to the majority (or a specified proportion of them). Such clauses are (and were in 2005) common in shareholder agreements.[12] First, because their existence needs to be expressed, as they are not readily implied. Second, because in their absence, a minority may obstruct a sale. The absence of such a clause here is distinctive. We were informed by Mr Coyle that at an earlier stage in this proceeding Mr Dold advanced a claim in negligence against Mr Murphy for not including such a provision, but then thought better of that idea. Notably also, nor did the agreement feature another relatively common provision: a “tag-along” provision enabling a minority shareholder to be bought out with a majority vendor. All the agreement contained were relatively standard rights of pre-emption in the event a shareholder proposed to sell his shares to a third party (cl 12).
[12]See, for example, Dunning v Chabro Holdings Ltd (2006) 3 NZCCLR 599 (HC) at [39].
Mr Murphy’s situation as a minority shareholder put him at a significant potential disadvantage, particularly if Mr Dold and Mr Jacobs united against him. He did not enjoy the benefit of the unanimity requirements in cl 5.5 (sale or purchase of assets exceeding NZD 50,000, limits on borrowing, change of business scope, etc). But it also put him at a significant advantage in the event the majority/minority dispute concerned sale. The absence of drag-along rights in the agreement meant that he could not be forced to sell, and potentially might seek a premium for his shares. That is reinforced by cl 5.4.7 (requiring unanimity of all participants if a sale of assets was instead adopted).
The point can be tested by three hypothetical fact variations. First, what if for some reason Mr Murphy simply did not want to sell his shares at all? The effect of the argument made for Mr Dold would be that that autonomy was overridden in advance by cl 3.3.1 if the offer represented the best available return on shareholders’ funds. Secondly, what if Mr Murphy had asked Quadrant for the premium, rather than Messrs Dold and Jacobs? The effect of the argument made appears to be that he could not do so, if that might jeopardise the transaction on offer. Thirdly, what if Mr Murphy had made his demand of Messrs Dold and Jacobs, but much earlier — at the start of the sale process. Not at the last minute, and with no inflammatory imagery of guns being held to heads. Simply a demand that he be better treated for some reason or other. The effect of the argument appears to be that again he could not do so because the effect of cls 1.1.5, 3.1.1 and 3.3.1 requires some sort of utilitarian equality pro rata. We think that an outcome no objective observer would accept. There might be every reason why an adjustment should be made, and in fairness to Mr Murphy there seems no doubt he thought there were bona fide reasons why one should be made in this case. In our view, Mr Murphy’s mercenary stance offends courtesy, rather than contract. In a moment we will consider whether it offends equity also.
As noted earlier, there is no suggestion here that Mr Murphy’s demand was unlawful by reason of a collateral agreement formed during negotiations in July to August 2016, or because of a promissory estoppel. It is not suggested, for instance, that his late-breaking demand came after an earlier-agreed position on which the others had relied and changed their positions detrimentally.[13] That might perhaps have been the case if they had already signed up with Quadrant at that stage, but that was not the case. In any case, it was not pleaded.
[13]See, for example, Doig v Tower Insurance Ltd [2019] NZCA 107.
We do not see the indicative sunset provision in cl 3.1.4 either adding to or altering the analysis above, which reflects the essential emphasis in argument on cl 3.3.1 as altering autonomy.
Finally, we address cl 18.1, concerning confidential information. We decline leave to amend the claim at this late stage on appeal. First, the argument lacks cogency. The willingness of the shareholders to sell was not confidential; the sale process was at least to some extent in the public domain. Each of the three shareholders was privy to the discussions about price. They were no more precluded by cl 18.1 from contending for an adjustment inter se than they were from arguing among each other that the price was inadequate. Moreover, we consider that cl 18 gives rise to more than simply a question of law, and that Mr Murphy was entitled to confront the argument in evidence and answer it there, not belatedly and bereft of evidence on appeal. As this Court observed in Wham-O MFG Co v Lincoln Industries Ltd:[14]
The practice adopted in this Court has been for many years that a point not taken in the Court below cannot be raised on appeal if it might have been met by evidence in the Court below …
Conclusion
[14]Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 671. See also Needham v Samy Trustee Ltd [2017] NZCA 117, (2017) 24 PRNZ 184 at [15].
We answer Issue one in the negative. The demand did not breach the terms of the shareholders’ agreement.
Issue two: Did the demand breach a fiduciary duty owed to Mr Dold?
We turn now to the breach of fiduciary obligation claim. It is the argument Mr Campbell placed greatest weight on before us.
Judgment
The Judge held that Mr Murphy wore a number of different hats in the negotiation with Quadrant. She said:[15]
He was a director of Cruise Whitsundays, and provided services to that company through Siena Consulting Ltd. He was also the point of contact for Hopgood Ganim [the lawyers acting for Cruise Whitsundays and its shareholders]. It is entirely possible that he undertook legal work in one or more of those capacities (although exactly what he did is not clear from the evidence). In that respect at least, Mr Murphy may have owed fiduciary duties in relation to that work. Mr Murphy was also appointed the sellers’ representative – a role formally recognised in the sale and purchase agreement. In that role, too, Mr Murphy owed fiduciary duties as agent for his fellow shareholders.
[15]High Court judgment, above n 1, at [59].
But the Judge concluded that Mr Murphy was acting as shareholder when dealing with Mr Dold and Mr Jacobs. He was stipulating the terms on which he was prepared to sell his shares.[16] While the shareholders’ agreement had provided for a common objective of maximising shareholders’ returns and ensuring the companies were managed in order to facilitate their future sale, the pursuit of those objectives was to be undertaken via an incorporated company. Such a mechanism was unlikely to incorporate fiduciary obligations.[17] The Judge drew support for her conclusion from a provision in the shareholders’ agreement which expressly excluded partnership as between shareholders.[18] The Judge also noted cl 5.4.7 of the shareholders’ agreement, which she saw as preserving the unconditional right of each shareholder to refuse to sell his shares. The Judge concluded:[19]
That is the very antithesis of a fiduciary relationship where the obligations are of trust and confidence, and of mutual loyalty. In this case, at least insofar as the sale of shares was concerned, it was each shareholder for themselves. I consider the express terms of the Shareholders’ Agreement preclude a finding that Mr Murphy owed a fiduciary duty to his fellow shareholders not to make the demand that he did.
Submissions
[16]At [63].
[17]At [66], citing Amaltal Corp Ltd v Maruha Corp [2007] NZSC 40, [2007] 3 NZLR 192 at [20].
[18]At [67]: see cl 22.3 of the shareholders’ agreement.
[19]At [72].
Mr Campbell submits that the Judge was wrong in placing reliance on cl 5.4.7, which is inapplicable to the sale of shares (but applies to the sale of the undertaking of a group company). The fact that the parties had reduced their rights to contract did not exclude equitable intervention. In particular, he relied on the observations of Blanchard J in Almaltal Corp Ltd v Maruha Corp.[20]
[20]Amaltal Corp Ltd v Maruha Corp, above n 17, at [21].
Mr Campbell submits that Mr Dold and Mr Murphy had been working closely together to achieve the present sale, with Mr Murphy focused on legal issues. Mr Murphy participated in the Quadrant negotiation and collectively the three shareholders had authorised Deloitte to agree to the indicative purchase price for all of the shares at AUD 112 million. Mr Murphy then disclosed his “pre-meditated and duplicitous plan to hold his fellow shareholders to ransom”. That was at odds with the relationship that existed between him and Mr Dold. That relationship rested on Mr Murphy’s experience as a lawyer, which resulted in him joining the venture. Mr Campbell submits:
here is … one of the three “partners” responsible for overseeing legal issues, drafting the shareholders’ agreement in the first instance, managing the restructure of the ownership of the shareholding resulting in himself being in a position to make such a demand and in a pre-meditated fashion, manoeuvring events to secure a significant financial advantage for himself.
This, it is said, supports the argument that a fiduciary duty existed at the time the demand was made. The evidence established that Mr Dold did repose trust and confidence in Mr Murphy. The deal before them was extremely good for all three, vastly greater than the earlier potential offers and expectations, and the combination of many years of work towards such a sale. The three shareholders had effectively agreed the sale price before Mr Murphy made his demand. Mr Campbell submits that a strict black letter approach might generate the decision reached by the Judge, but equity exists to remedy unconscionable wrongs.
Discussion
We do not accept the argument made for Mr Dold on fiduciary obligation. We make four points.
First, fiduciary duties are assumed responsibilities. Fiduciary responsibility may be inferred where the relationship is one of assumed trust, confidence and loyalty. These qualities were identified in a trio of New Zealand Supreme Court decisions in the latter-half of the first decade of this century: Chirnside v Fay, Paper Reclaim Ltd v Aotearoa International Ltd and Amaltal Corp Ltd v Maruha Corp.[21] As Tipping J noted in the Chirnside decision, a relationship may give rise to fiduciary duties in two situations. The first is where there is an inherently fiduciary relationship between the parties, such as between solicitor and client, trustee and beneficiary, and principal and agent.[22] The second context is where particular aspects of a relationship that is not inherently fiduciary nonetheless justify it being classified as such. As Tipping J has noted:[23]
No single formula or test has received universal acceptance in deciding whether a relationship outside the recognised categories is such that the parties owe each other obligations of a fiduciary kind.
But the Judge went on to note:[24]
[A]ll fiduciary relationships, whether inherent or particular, are marked by the entitlement … of one party to place trust and confidence in the other. That party is entitled to rely on the other party not to act in a way which is contrary to the first party’s interests.
[21]Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433; Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169; and Amaltal Corp Ltd v Maruha Corp, above n 17.
[22]Chirnside v Fay, above n 21, at [73].
[23]At [75].
[24]At [80].
The point was put slightly differently by Blanchard J in the Paper Reclaim decision:[25]
A fiduciary relationship will be found when one party is entitled to repose and does repose trust and confidence in the other. The existence of an agreement, express or implied, to act on behalf of another and thus to put the interests of the other before one’s own is a frequent manifestation of a situation in which fiduciary obligations are owed. Partners are a classic example of parties in that situation. Their position is different from that of parties to a contract who may have to cooperate but are doing so for their separate advantages.
[25]Paper Reclaim Ltd v Aotearoa International Ltd, above n 21, at [31] (footnote omitted).
The same Judge put it slightly differently again in the Amaltal decision, noting that in a fiduciary relationship:[26]
[O]ne party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed.
[26]Amaltal Corp Ltd v Maruha Corp, above n 17, at [21].
We consider the relevant principles can be summarised in this way. Some relationships are inherently fiduciary in nature, involving trust, confidence and a degree of dependence, such as solicitor and client and trustee and beneficiary. In other cases a fiduciary relationship is only likely to be inferred when the legal relationship between parties involves: (1) the conferral of powers in favour of the alleged fiduciary, which may be used to affect the proprietary rights of the beneficiary; (2) the apparent assumption of a representative or protective responsibility by the alleged fiduciary for the beneficiary (for example, to promote the beneficiary’s interests, or to prefer the interests of the beneficiary over those of third parties); and (3) the implied subordination (although, not necessarily, elimination) of the alleged fiduciary’s own self-interest.
Secondly, where the essential legal relationship is contractual, primacy must be given to the contract. The contract is the starting place. As Blanchard J observed in Paper Reclaim:[27]
When parties have formed a contract the correct approach is first to decide exactly what they have agreed upon. Only then should the court consider whether any particular aspect of their agreement gives rise to a relationship which can properly be characterised as fiduciary, imposing an obligation of loyalty on one or both parties, which supplements the express or implied contractual powers. It is not enough to attract an obligation of loyalty that one party may have given up more than the other in entering into the contract or that the contract may be more advantageous for one party than the other. Nor is a relationship fiduciary in nature merely because the parties may be depending upon one to perform the contract in its terms. That would be true of many commercial contracts which require co-operation.
[27]Paper Reclaim Ltd v Aotearoa International Ltd, above n 21, at [31].
For the same reason given in relation to the first issue, we think it too long a bow to draw to find a fiduciary relationship from the thin patchwork of mutual obligations provided for in the contract. While it contains aspirational objectives in relation to maximisation of shareholders’ returns on funds invested, there are other indicators inconsistent with the proposition that the minority shareholder may not seek a premium (or, for that matter, the majority shareholders). The Judge erred a little in placing as much emphasis as she did on cl 5.4.7, which relates not to the sale of shares but to the sale of the company’s undertaking. But it is nonetheless a signal contrary to representative responsibility in relation to the sale of assets of the company, enabling one party to prefer their own position over those of others. The clause excluding partnership, on which the Judge relied, is also a counter-indicator to fiduciary responsibility, although it does not necessarily exclude it altogether.
What is missing here are the basic indicia indicated above in [55]. No particular power is conferred on Mr Murphy. He is simply one shareholder among three. As a result, he has no particular representative responsibility or obligation to actively promote other shareholders’ interests over his own or those of third parties. This is not a case like Chirnside v Fay involving an unincorporated joint venture where one party is given particular responsibilities, and takes personal advantage of the opportunity presented by them to the exclusion of the interests of the other venturer. Nor is it like Amaltal, where one of the contracting parties was given exclusive responsibility for undertaking accounting and tax arrangements on behalf of the combined venture. Here, the parties may be taken to have considered it sufficient to organise their affairs on the basis of a company, omitting drag-along rights, but incorporating limited rights of unanimity and limited exclusion of self-interest in cl 3.3.
Thirdly, it would be quite exceptional to impose fiduciary duties on a minority shareholder. As the Supreme Court observed in Amaltal, when commercial parties elect to use an incorporated vehicle for a loose joint venture, it is unlikely that their relationship as a whole will be fiduciary in nature.[28] Of course directors owe the company a fiduciary duty, but the argument before us focused on Mr Murphy’s responsibilities as a co-shareholder, not as a director of Cruise Whitsundays. Doubtless that was because the sale was a sale of shares, with control of the company passing to Quadrant on settlement. But the proposition that shareholders owe fiduciary duties generally to one another would represent a surprising development, and one we think contrary to principle. With certain statutory exceptions — most notably relief against oppression under s 174 of the Companies Act 1993 — shareholders are entitled to act selfishly in their dealings with one another.[29] That is the antithesis of fiduciary obligation. The fact that one shareholder’s actions may diminish the value of another’s shareholding does not mean there is a fiduciary obligation: impact on another’s worth is not enough without the other indicia above in [55]. The shareholder-shareholder relationship is not inherently fiduciary.[30] An exception exists in the authorities for what Professor Farrar calls the “special facts fiduciary relationship”.[31] Coleman v Myers is the locus classicus, involving director‑shareholders controlling the majority of shares then setting about a full takeover of a tightly-held company.[32] It was not argued before us that Mr Murphy stood in a comparable position to Mr Myers or his father.
[28]AmaltalCorp Ltd v Maruha Corp, above n 17, at [20].
[29]Pender v Lushington (1877) 6 Ch D 70 (CA) at 75–76.
[30]Brant Investments Ltd v KeepRite Inc (1991) 3 OR (3d) 289, [1991] OJ No 683 (ONCA) at [16]: Bell v Source Data Control Ltd (1988) 66 OR (2d) 78, [1988] OJ No 1424 (ONCA) at [40]; and Stacey v Watson [2016] NZHC 1891, [2017] NZCCLR 5 at [116].
[31]John H Farrar “The duties of controlling shareholders – complex relationships, legal confusion and new approaches” (2015) 30 Aust J Corp Law 140 at 145.
[32]Coleman v Myers [1977] 2 NZLR 225 (CA). It may be observed that caselaw in the United States has long recognised a fiduciary duty owed by a dominant or controlling shareholder to the minority: Pepper v Litton 308 US 259 (1939).
Fourthly, we do not find an assumption of fiduciary responsibilities, apart from the shareholders’ agreement. We do not find the parties had reached a collateral agreement or understanding that precluded the exercise of Mr Murphy’s rights as a minority shareholder to seek a premium. As we have noted already, Mr Dold’s case was not presented on that basis, and nor was it pleaded. Had such an agreement or understanding existed, it would have been better addressed as a matter of law, via contract or estoppel, rather than attempting to apply the whole equitable carapace of fiduciary obligation where it has no business being. Finally, we do not find Mr Murphy’s appointment as sellers’ representative material. That argument was made in the High Court, but not before us. That appointment might have created fiduciary responsibilities, on the basis noted above at [55]. But the appointment was made over a month after the demand had been made, and in the face of that fact.
Conclusion
We answer Issue two in the negative. Making the demand did not breach a fiduciary duty owed by Mr Murphy to his fellow shareholders.
Issue three: Did the demand (and payment) amount to economic duress?
We turn now to the allegation that the demand (and payment) amounted to reversible economic duress. This was very much a third-string argument for the appellant.
Judgment
Applying the decision of this Court in McIntyre v Nemesis DBK Ltd, a case in which duress was perhaps an inevitable pleading, the Judge addressed two issues.[33] First, whether there was an exertion of illegitimate pressure on the victim. Second, whether that pressure compelled the victim to enter the obligation which it is now sought be set aside.
[33]High Court judgment, above n 1, at [79], citing McIntyre v Nemesis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463.
The Judge considered timing first. She noted that the demand was made on 3 August 2016, that Mr Dold agreed to make the payment on 7 August 2016, the day before the memorandum of understanding needed to be signed, and that the payment was not made until 31 October 2016, two and a half months after the demand was made.[34] Mr Dold had time to consider his rights, and sought a copy of the shareholders’ agreement immediately after the demand was made. There was some negotiation, resulting in Mr Murphy agreeing to a payment of AUD 4 million, rather than 5 million.[35] Mr Dold sought and obtained legal and tax advice on aspects of the transaction with Quadrant. He either did, or had the opportunity to, take legal advice in relation to the payment to Mr Murphy.[36] The Judge found that the decision to make the payment was a calculated and considered commercial decision made by Mr Dold after weighing the options available to him.[37]
[34]At [81]. By our estimate, it was nearer three months.
[35]At [82].
[36]At [83].
[37]At [86].
Next, the Judge noted that the demand was not made in breach of any prior legal obligation. It was not a breach of contract.[38] Nor had she found it a breach of fiduciary duty. She noted that Mr Dold objected less to the quantum of the demand, and more to the way in which Mr Murphy went about making it.[39] She said:[40]
Many may share Mr Dold’s outrage at Mr Murphy’s behaviour. Some may consider it sharp and at odds with a sense of fair play. But commercial dealings are full of examples of pressure brought to bear on opposing parties, and the exploitation of opportunities to benefit one party at the expense of others. Although Mr Murphy’s behaviour might be regarded as distasteful, ultimately, I do not consider it to be illegitimate.
That is fatal to the economic duress cause of action and it is unnecessary to consider whether the illegitimate pressure coerced payment to be made. Failure to establish economic duress means that the money had and received cause of action must also fail, and this cause of action is dismissed.
Submissions
[38]At [87].
[39]At [90].
[40]At [91]–[92].
Mr Campbell sensibly retreated to a submission that duress in this case would have to be “lawful act duress” if his prior submissions were not accepted. He submitted that the demand still amounted to illegitimate duress even if not involving a breach of contract or breach of fiduciary duty. That was because, as he put it, “Mr Murphy did not genuinely believe he was entitled to the [AUD] 4 million that he demanded”. Mr Murphy had accepted in cross-examination that there was no prior agreement that he be compensated by that amount for the extra effort that he been put in, and that he had been paid an agreed daily rate which he considered in its own terms fair. Mr Murphy is an experienced commercial solicitor. Mr Campbell submits that if Mr Murphy genuinely believed he had an entitlement, he would not have left his demand to the very last minute.
Further, the test was not whether Mr Dold’s will was “overborne”. Rather, it was whether he had submitted to the demand because there was no other practical alternative open to him. Mr Murphy had made clear that the “deal [would] not proceed” if the payment was not received. The shareholders had already gone back to Quadrant collectively, seeking an increased sum, and had obtained an additional AUD 2 million. Nothing more might be obtained there. Mr Dold was left without any practical alternative to payment. While he had access to legal advice, Mr Campbell submits the condensed timeframe meant that did not increase the range of practical alternatives open to Mr Dold.
Discussion
We do not accept Mr Dold’s argument on lawful act duress. The starting point must be that a threat to act lawfully — here, to withdraw from the sale unless the proceeds were redistributed — should not normally be converted to an unlawful act via the mechanism of duress. As the authors of Burrows, Finn and Todd on the Law of Contract in New Zealand suggest, it is a development of the law that warrants some circumspection.[41] Exceptionally, a threat to do something lawful may become unlawful duress, if attached to a conditional demand (for instance, not to do that act in exchange for some benefit). The obvious (but easy) instance is a threat to report a crime (a lawful act), attached to a demand suggesting the report will not be made if a sum is paid (an unlawful act – blackmail).[42] It is easy enough to pronounce that the combination there amounts to the exercise of illegitimate pressure, in the sense Lord Scarman used that expression in Universe Tankships Inc of Monrovia v International Transport Workers Federation.[43]
[41]Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 422.
[42]See Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (HL) at 401.
[43]At 400. Applied in this jurisdiction in McIntyre v Nemesis DBK Ltd, above n 33, at [20].
The case law has hinted at duress potentially being made out in rare cases where each element — threat and demand — individually are lawful, but in combination became unlawful.[44] But actual instances are tantalisingly elusive. Those that appear to be lawful act duress cases turn out, on closer inspection, to be explicable on the basis of an unlawful act.[45] To date, the concept of lawful act duress appears to reside more in dicta than in practice.
[44]See Nelson Enonchong Duress, Undue Influence and Unconscionable Dealing (3rd ed, Sweet & Maxwell, London, 2019) at [3-020]; Haines v Carter [2001] 2 NZLR 167 (CA) at 189; and Attorney-General for England and Wales v R [2003] UKPC 22, [2004] 2 NZLR 577 at [16].
[45]Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC 273 (Comm), [2012] 2 All ER (Comm) 855 is explicable on the basis that a prior repudiation was an essential part of the narrative. Borelli v Ting [2010] UKPC 21, [2010] Bus LR 1718 can be explained on the basis that forgery and unconscionable conduct are inextricable parts of the narrative. See Rex Ahdar “Contract Doctrine, Predictability and the Nebulous Exception” (2014) 73 CLJ 39 at 45–47; and Paul Davies and William Day “‘Lawful Act’ Duress” (2018) 134 LQR 5 at 7.
A threat to no longer perform a contract is not necessarily unlawful, as this Court’s decision in McIntyre v Nemesis DBK Ltd demonstrates. In that case a three‑year subdivision project took eleven. One of the participants, who was managing the project, became dissatisfied with the remuneration provided in the agreement. This Court said:[46]
[W]e conclude that although Mr Hastwell’s conduct was reprehensible in many respects, it did not amount to, and was not construed by the trustees as, a threat to breach the contractual obligation to provide management services by simply stopping work. He was clearly disgruntled that the subdivision had gone badly and the amount of time involved in bringing it to fruition had exceeded both sides’ expectations. He was concerned that the result was that the remuneration to which he was entitled under the contracts did not reflect the additional work that was required. This led him to express his sense of grievance in an extravagant and repetitive manner, with a view to persuading the trustees to agree to amend the contract to increase the remuneration. In doing so, he sought to bring matters to a heads by indicating that he could not, or would not, continue as manager.
…
[W]e conclude that, viewed overall, Mr Hastwell’s pursuit of a change in the basis of his remuneration, though forceful and repetitive, did not cross the line between forceful and illegitimate pressure. However, we accept that the conclusion is a finely balanced one.
[46]McIntyre v Nemesis DBK Ltd, above n 33, at [59] and [61].
It is clear that a threat not to perform a contract is not necessarily repudiatory. The maker may have remedial options allowing renegotiation — for example, if the contract arguably is frustrated. If they could be painted, contractual disputes would usually feature shades of grey, rather than the bold primary colours of certainty. And even if the threat is repudiatory, there may be extenuating circumstances that mean that a variation made in response is not infected by duress.[47] The common law does not abhor the variation of contract. Variation is often necessary to perpetuate an enterprise. It is not the function of contract law to lock contracting parties into an economic death spiral. It is often more efficient to permit renegotiation. The common law, which is the progenitor of duress, is habitually concerned with efficiencies. Efficiency of outcome is, therefore, a philosophical constraint on the enlargement of duress. Equity, in contrast, tends to be more sentimental.
[47]The classic instance is Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (EWCA) where a plaintiff subcontractor had badly underpriced its contract and there was a risk it would default. This was presented more as fact than threat. The defendant contractor agreed to pay more in exchange for the plaintiff completing the contract. The Court of Appeal held the variation was not voidable for duress. See also DSND Subsea Ltd v Petroleum Geo Services ASA [2000] EWHC 185, [2000] BLR 530 (TCC) at [134] per Dyson J: “The Contract did not contain a provision which entitled DSND to suspend work. The Contract simply did not make provision for a situation such as occurred. If it were necessary so to hold, I would say that the suspension of work on the RTIAs pending resolution of the insurance/indemnity question, even if it was a breach of contract, and even if it amounted to pressure, did not amount to illegitimate pressure. It was reasonable behaviour by a contractor acting bona fide in a very difficult situation”.
The difficulty, then, is in deciding when a proposed variation to a contract is so freighted by threats as to overstep the mark and constitute “illegitimate pressure”. As Dyson J (as he then was) once observed, “Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining”.[48]
[48]DSND Subsea Ltd v Petroleum Geo Services ASA, above n 47, at [131].
Professor Beale, writing in Chitty on Contract suggests:[49]
[T]here can be no doubt that even a threat to commit what would otherwise be a perfectly lawful act may be improper if the threat is coupled with a demand which goes substantially beyond what is normal or legitimate in commercial arrangements. …. In American law there are many illustrations of other threats to commit acts lawful in themselves which have been held to amount to duress when coupled with unreasonable demands. For instance, a threat (lawfully) to dismiss an injured employee unless he accepted a manifestly low settlement for his injuries has been held to be unlawful duress. It seems probable that a similar decision would be reached on such facts by an English court. On the other hand, care must be taken in treating threats lawful in themselves as amounting to duress, for otherwise threats commonly used in business (e.g. of lawful strikes) would fall into the category of economic duress.
That formulation is not without difficulty, and it may be doubted that the bar for duress in a purely commercial context should be set according to what is perceived to be the “normal” range of bargaining positions.
[49]Hugh Beale (ed) Chitty on Contracts (33rd ed, Sweet & Maxwell, London, 2018) vol 1 at [8-046] (emphasis added).
In Al Nehayan v Kent Leggatt LJ (as he then was, but sitting in the Commercial Court) suggested that:[50]
In a number of cases courts have recognised that making a lawful threat to press an illegitimate demand may constitute duress and that the measure of legitimacy for this purpose is not the defendant’s self-assessment but prevailing standards of morality and commercial propriety.
That unhappily uncertain proposition too may be doubted, not least because the common law does not yet impose a duty of good faith in contractual dealing, and it was rejected by the English Court of Appeal in Times Travel (UK) Ltd v Pakistan International Airlines Corp.[51]But what is arresting about Leggatt LJ’s analysis is its reliance on the related but distinct, equitable, doctrine of unconscionability. Indeed, apart from CTN Cash and Carry Ltd v Gallaher[52] (in which the claim of duress failed) all the cases Leggatt LJ cites in support of that proposition are unconscionability
ones.[53] There is nothing necessarily wrong with applying unconscionability principles in a commercial context, but such principles do not define the more restrained doctrine of duress.[54]
[50]Al Nehayan v Kent [2018] EWHC 333 at [182] (emphasis added).
[51]Times Travel (UK) Ltd v Pakistan International Airlines Corp [2019] EWCA Civ 828, [2020] Ch 98, at [101]–[103]. Leave to appeal to the Supreme Court has been granted: Times Travel (UK) Ltd v Pakistan International Airlines Corp [2020] 1 WLR 2523.
[52]CTN Cash and Carry Ltd v Gallaher Ltd [1993] EWCA Civ 19, [1994] 4 All ER 714.
[53]See Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 (NSWCA); Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd's Rep 620 (EWHC); and Borrelli v Ting, above n 45.
[54]In a case of unlawful act duress, the unlawful act (be it threat or demand) may of course be unconscionable: see for example Borelli v Ting, above n 45, at [32]; and Crescendo Management Pty Ltd v Westpac Banking Corp, above n 53, at 46. But that begs the question why duress need then be resorted to at all.
The case on appeal before us is yet another stage removed from those where duress is advanced to avoid a variation entered under pressure. That is because Mr Murphy’s threat was not to break a contract. Rather, it was a threat not to enter one. As we noted earlier, Mr Dold did not claim that the negotiating process with Quadrant compelled Mr Murphy to complete the sale process.[55] Promissory estoppel was not pleaded by Mr Dold; rather the alleged obligation to complete was based on the shareholders’ agreement or fiduciary duty, both of which we have rejected.
[55]See above at [37], [42] and [60].
A threat not to enter a contract, all other things being equal, is most unlikely to be an unlawful or illegitimate act:[56]
A person who obtains a benefit from another by threatening not to contract with him in the future is generally not liable to restore that benefit. His threat is not illegitimate. As a general rule, he may contract with whom he pleases and upon what terms he pleases; it cannot be said the benefit has been obtained through a wrongful act.
[56]Charles Mitchell, Paul Mitchell and Stephen Watterson (eds) Goff and Jones: The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016) at [10–68].
In Times Travel (UK) Ltd v Pakistan International Airlines Corp the plaintiff travel agency sought to set aside a new agency agreement with Pakistan Airlines, on whose business it was very largely dependent. The airline had failed to pay a number of agencies, including the plaintiff, their full entitlements under the former agency agreement. Some had sued. The airline then exercised a power to terminate the former agreement, restrict ticket availability in the meantime, and presented a new agreement which required signatories to waive extant claims for unpaid commission. Warren J was prepared to set aside the new agreement on the basis of lawful act duress, it not being suggested that anything other than non-payment of the unpaid commission was unlawful.[57] However that decision was set aside in the Court of Appeal, which held the agreement was not infected by duress.[58] As noted earlier, leave to appeal to the Supreme Court has been given. Professor Davies and Mr Day suggest, however, that at best for the plaintiff the case is one of unlawful act duress, because the prior breach of contract by the airline could not be severed, was part of a “single chain of events” and that the purpose of the threat (not to contract) was that the airline be excused that unlawful conduct.[59]
[57]Times Travel (UK) Ltd v Pakistan International Airlines Corp [2017] EWHC 1367 (Ch).
[58]Times Travel (UK) Ltd v Pakistan International Airlines Corp, above n 51.
[59]Davies and Day, above n 45, at 9. See above at [69].
James Edelman (writing extra-judicially) and Elise Bant are particularly critical of lawful act duress being enlarged to cases involving premia extracted for agreeing to contract. They see this as a matter for statute law — that is, competition laws — rather than the common law of duress:[60]
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. An infringement of rules of competition law should be unlawful and illegitimate for the purposes of the unjust factor of duress. 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.
[60]James Edelman and Elise Bant Unjust Enrichment (2nd ed, Hart, Oxford, 2016) at 217. See also Paul Davies “Bad Bargains” (2019) 72 CLP 253 at 281.
We consider, therefore, that the Court of Appeal’s Times Travel decision is of little assistance to Mr Dold. We conclude that the opportunistic behaviour of Mr Murphy, withholding his signature at the eleventh hour but in the absence of any overriding obligation to sign, was not unlawful. Two things follow. The first is that, contracting at large as he did, the question of the genuineness of Mr Murphy’s belief in his entitlement to make the demand did not arise. In fact, he appeared genuinely to believe he was so entitled.[61] In law, he was entitled to act in his own self-interest, even if his actions were both unexpected and ungenerous. Secondly, it is unnecessary in these circumstances to go on to consider Mr McAnally’s alternative argument that Mr Dold was not coerced into paying the premium Mr Murphy demanded.
Conclusion
[61]See above at [41].
We answer Issue three in the negative also. The payment was not the product of economic duress.
Result
Leave to amend the appellants’ claim is denied.
The appeal is dismissed.
The respondents are entitled to costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Cameron Fleming & Associates, Auckland for Appellants
Keegan Alexander, Auckland for Respondents
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