Pakistan International Airline Corporation (Respondent) v Times Travel (UK) Ltd (Appellant)

[2021] UKSC 40

On appeal from: [2019] EWCA Civ 828

Pakistan International Airline Corporation (Respondent) v Times Travel (UK) Ltd (Appellant)

before

Lord Reed, President

JUDGMENT GIVEN ON

18 August 2021

Heard on 2 and 3 November 2020

Appellant	Respondent
Philip Shepherd QC	Nigel Jones QC
Heather Murphy	Thomas Bell

Professor Paul Davies

(Instructed by Charles	(Instructed by City
Morgan Lawyers)	Solicitors Ltd t/a Farani

Taylor Solicitors)

1st Intervener
Bankim Thanki QC
Ben Jaffey QC
Simon Atrill

(Instructed by Quinn Emanuel Urquhart &

Sullivan UK LLP)

2nd Intervener

Oliver Jones

(Instructed by Norton Rose Fulbright LLP)

3rd Intervener

Thomas Roe QC

Richard Samuel

Simon Reevell

Daniel Black

Hannah Fry

(Instructed by Hausfeld &

Co LLP (London))

Interveners:

LORD HODGE: (with whom Lord Reed, Lord Lloyd-Jones and Lord Kitchin agree)

1. I am very grateful to Lord Burrows for setting out the facts of the case and the legal proceedings to date. There is a great deal in the exposition of the law in his clear judgment with which I agree. In particular, I agree with what he says about (i) the essential elements of duress (paras 78-80), (ii) the existence in English law of the concept of lawful act duress (paras 82-92), (iii) the importance of clarity and certainty in our commercial law, which means that the concept of lawful act duress must not be stated too widely (para 93), (iv) the rejection of a range of factors approach (para 94), (v) the similar rejection of the use of a wide principle of good faith dealing (para 95), (vi) the appropriateness of focusing on the nature and justification of the demand rather than the legality of the threat (paras 88 and 96), and (vii) the law’s general acceptance of the pursuit of commercial self-interest as justified in commercial bargaining and the rarity of cases where lawful act duress will be found to exist in such bargaining (paras 97-99). I therefore also agree with the first four points of his summary (para 136(i)-(iv)). I also agree that the appeal should be dismissed. In relation to point (vi) above, I would add that the court in focusing on the nature and justification of the demand, as the case law which I discuss below shows, has regard to, among other things, the behaviour of the threatening party including the nature of the pressure which it applies, and the circumstances of the threatened party.

2. Where I respectfully disagree with him is in my analysis of what the law has recognised as an illegitimate threat or pressure. As I will seek to show, the courts have developed the common law doctrine of duress to include lawful act economic duress by drawing on the rules of equity in relation to undue influence and treating as “illegitimate” conduct which, when the law of duress was less developed, had been identified by equity as giving rise to an agreement which it was unconscionable for the party who had conducted himself or herself in that way to seek to enforce. In other words, morally reprehensible behaviour which in equity was judged to render the enforcement of a contract unconscionable in the context of undue influence has been treated by English common law as illegitimate pressure in the context of duress.

3. The boundaries of the doctrine of lawful act duress are not fixed and the courts should approach any extension with caution, particularly in the context of contractual negotiations between commercial entities. In any development of the doctrine of lawful act duress it will also be important to bear in mind not only that analogous remedies already exist in equity, such as the doctrines of undue influence and unconscionable bargains, but also the absence in English law of any overriding doctrine of good faith in contracting or any doctrine of imbalance of bargaining power. As I will seek to explain, the absence of those doctrines in English law leads me to conclude that Times Travel’s claim for lawful act economic duress would not have succeeded in this case even if it had shown that Pakistan International Airline Corporation (“PIAC”) had made what Lord Burrows has defined as a bad faith demand.

4. If one focuses on the few cases in which a remedy has been provided for what would now be analysed as lawful act duress, there are to date two circumstances in which the English courts have recognised and provided a remedy for such duress. The first circumstance is 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. The second 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 both categories of case the defendant has behaved in a highly reprehensible way which the courts have treated as amounting to illegitimate pressure.

(1)	The first circumstance: exploitation of knowledge of criminal activity

5. The examples of the first circumstance are the three cases to which Lord Burrows refers in para 89 of his judgment. In Williams v Bayley (1866) LR 1 HL 200 a son forged his father’s signature indorsing promissory notes for substantial amounts of money. Representatives of the bank, on discovering the forgery, put pressure on the father to undertake to repay the sums. The representatives stated that they could not compound a felony (ie stifle a prosecution) and that conviction for the offence would involve transportation for life. The father, faced with this implicit threat to prosecute his son unless he took on the debt, undertook to pay the debt and granted an equitable mortgage of his property to secure it. The House of Lords held that the contract was illegal as it was an agreement to stifle a prosecution and, separately, the contract was invalid on the equitable ground that it had been procured by undue influence.

6. In Kaufman v Gerson [1904] 1 KB 591, the Court of Appeal refused to enforce a contract entered into by two people domiciled in France, by which the wife of A, who had misappropriated money belonging to B, undertook to pay to B the misappropriated amount in consideration of his not prosecuting her husband. Expert evidence established that such an agreement was valid in French law with the result that the defence of illegality failed. But the Court of Appeal upheld the defence of coercion; Collins MR stated (p 597) that it was “impossible to say that it was not coercion to threaten a wife with the dishonour of her husband and children”. Romer LJ (p 599) stated that the plaintiff had “extorted” the contract from the wife by threats of criminal proceedings against her husband if she did not comply. Mathew LJ (p 600) described the means by which the contract had been obtained as “unjust and immoral”.

7. The third case, Mutual Finance Ltd v John Wetton and Sons Ltd [1937] 2 KB 389, involved the financial institution making an implied threat to prosecute a family member for forgery to obtain a guarantee from a family company. Joseph Wetton obtained a lorry on hire purchase by forging signatures on a guarantee which purported to be executed on behalf of the company. Neither his father nor his brother, Percy Wetton, was aware of the document at the time. The representative of the financial institution, when negotiating the signing of the replacement guarantee from the company, was aware that Percy Wetton was concerned that the prosecution of his brother would kill their father, who was seriously ill. By stressing the seriousness of the matter for Joseph Wetton, the representative sought to apply pressure to obtain the company guarantee. Porter J held that duress at common law could not be pleaded because he understood that duress was limited to duress of the person, by the use of unlawful force or threats of unlawful force. He invoked the equitable doctrine of undue influence and cited both Williams v Bayley and Kaufman v Gerson as examples of the principle that undue influence might exist where a promise was extracted by a threat to prosecute certain third persons unless that promise were given. He continued by asking himself whether the principle was wide enough to cover the case where the persons involved were the brother and father of the alleged criminal and answered that question in the affirmative, stating (p 396) that he was inclined to say that:

“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.”

8. Those three cases pre-dated the development of the common law doctrine of lawful act duress and can be seen to rely on the equitable doctrine of undue influence which in the past would have been within the exclusive jurisdiction of the Chancery Courts. The coercion from the threat of prosecution of the third-party family member and the implied term of the contract which it extracted that no prosecution would take place, even where such a contractual term was legal under a governing foreign law, caused the courts to classify the behaviour of the person using the threat to obtain personal benefit as contrary to public policy, involving undue pressure or as unenforceable in equity.

9. Those three cases are now seen as examples of lawful act duress. In leading cases which have discussed the doctrine of lawful act duress, Steyn LJ in CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, 718 and Cooke J in Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm); [2012] 2 All ER (Comm) 855, 864 (“The Cenk K”) cited Mutual Finance Ltd as an example of an illegitimate threat in the context of the law of duress.

(2)	The second circumstance: using illegitimate means to manoeuvre the

claimant into a position of weakness to force him to waive his claim

10. The second circumstance in which the courts have upheld a plea of lawful act duress is illustrated by two cases.

11. In the first case, Borrelli v Ting [2010] UKPC 21; [2010] Bus LR 1718, the liquidators of Akai Holdings Ltd (“Akai”), which had collapsed into an insolvent winding up, wished to enter into a scheme of arrangement to obtain money to fund the liquidation. The scheme of arrangement needed shareholder approval and Mr Ting, Akai’s former chairman and chief executive officer, held a crucial minority shareholding in Akai through Blossom Assets Ltd (“Blossom”) and Costner Holdings Ltd (“Costner”), by which he could block the scheme of arrangement. Mr Ting failed to perform his duty as a former officer of Akai to assist the liquidators by providing information relevant to the winding up in the absence of adequate books and records of the company’s affairs. He sought to use the votes of Blossom and Costner to block the scheme of arrangement and he forged a document and procured the provision of false evidence to the liquidators in his opposition to the scheme. The liquidators objected to the votes which were purportedly cast by Blossom and Costner at the scheme meetings and applied to the court to disallow their votes. Mr Ting and those companies opposed that application. When time was running out for the liquidators to meet a court deadline for approval of the scheme of arrangement, they entered into a settlement agreement with Mr Ting, Blossom, Costner and another company. In that agreement the liquidators undertook not to pursue any claims against Mr Ting or those companies and to cease all investigations relating to the legal proceedings or to claims against Mr Ting. Thereupon, Mr Ting and his companies dropped their opposition to the scheme, which was approved by the court. The scheme of arrangement was then completed, and the liquidators received the payment needed to conduct the liquidation. Having later received reports from the Hong Kong police concerning criminal activity by Mr Ting, the liquidators stated that they regarded the settlement agreement as unenforceable or voidable and commenced legal proceedings against him in Hong Kong for misappropriation of funds from Akai. Mr Ting and his companies raised legal proceedings in Bermuda seeking a declaration that the settlement agreement was valid and an injunction to restrain the liquidators from prosecuting the proceedings in Hong Kong.

12. The Judicial Committee of the Privy Council (“the Board”) held that the settlement agreement was invalid because it had been entered into as a result of illegitimate economic pressure and that Mr Ting’s behaviour had been unconscionable. Lord Saville of Newdigate, who delivered the judgment of the Board, founded on two findings of fact by the trial judge. The first was Mr Ting’s deliberate failure to cooperate with the liquidators, including his failure to explain the absence of books and papers relating to the three years before Akai’s collapse. The second finding was that Mr Ting had procured the opposition by Blossom and Costner to the scheme solely with the intention of depriving the liquidators of funds and so preventing them from investigating further his conduct of Akai’s affairs. Mr Ting’s opposition, Lord Saville said, was not in good faith but was for an improper motive. He stated (para 32):

“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.”

Lord Saville repeated these points at para 35 of the Board’s judgment and stated that by adopting those “illegitimate means”, Mr Ting had left the liquidators “with no reasonable or practical alternative but to enter into the settlement agreement.”

13. It is clear in my view that in Borrelli the Board treated as important the conclusion that it was the unconscionable or illegitimate conduct of Mr Ting which placed the liquidators in the position that they had no reasonable or practicable alternative but to enter into the settlement agreement. By so acting, Lord Saville stated, at para 31, Mr Ting “had the liquidators over a barrel”. In other words, it was Mr Ting’s illegitimate or unconscionable acts which placed the liquidators in the position of vulnerability with the result that they had no reasonable alternative but to agree to his demands.

14. In the second case in which the courts have upheld a claim of lawful act duress, The Cenk K, we again see a party, A, against whom the other party, B, has a legal claim, using illegitimate means to manoeuvre B into a position in which B has no reasonable alternative but to enter into a contract with A, by which B waives his claims against A. In this case the claimant charterers entered into a charterparty with the owners of the Cenk K for the carriage of shredded scrap metal to China. The charterers had entered into a contract to sell the scrap metal to purchasers in China who had stipulated for a fixed shipment date. The owners, in repudiatory breach of the charterparty, chartered the Cenk K to another party but gave assurances to the claimant charterers that they would provide a substitute vessel to load the cargo at a later date and that they would compensate them for all damages resulting from their failure to provide the contracted vessel. In reliance on that assurance the charterers did not seek to find an alternative vessel. Several days later, the owners offered a substitute vessel which would have a delayed shipment date. The charterers negotiated with the Chinese purchasers to obtain their agreement to a later shipment date. The Chinese purchasers intimated that they would extend the shipment date but would only pay a reduced price per metric ton for the scrap. The owners offered to provide the substitute vessel at a discount on the freight which fell far short of the sum needed to compensate the charterers for the price reduction which the purchasers had demanded. The owners refused to offer a discount for the cargo which matched the reduced price which the purchasers were prepared to pay for the delayed shipment. The charterers informed the owners that they accepted the discount offered by the owners but reserved their rights to claim damages arising out of the breach of the charterparty. The charterers then accepted the purchasers’ revisions to the sale contract and the reduced price per metric ton that that entailed. Later that day, the owners gave the charterers a “take it or leave it” offer, requiring that the charterers accept the substitute vessel at the discounted price for freight which they had offered and that they waive all claims for loss and damage arising out of the nomination of the substitute vessel outside the contracted laycan and its resulting late arrival. The charterers accepted the offer under protest, explaining that the circumstances were urgent and they needed to mitigate their losses and accommodate their Chinese purchasers.

15. The dispute went to arbitration and the arbitrators held that the waiver agreement was voidable for economic duress. They found that the owners had been in repudiatory breach of contract, had lulled the charterers into a false sense of security by their assurances, and had manoeuvred them into a position where, because of the passage of time, they had no choice but to accept the owners’ “take it or leave it” offer. Cooke J, citing among other authorities CTN Cash and Carry Ltd and Borrelli, rejected the owners’ appeal against the arbitrators’ award. He held (para 36) that it was clear from the authorities that “illegitimate pressure” can be constituted by conduct which is not in itself unlawful “although it will be an unusual case where that is so.” He continued: “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’.” In para 40 he summarised the arbitrators’ findings describing the owners’ repudiation of the contract as “the dominant factor in the situation”. He continued:

“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 …”

16.       Cooke J summarised his conclusions on “illegitimate pressure” at para 44:

“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)

(3)	Summarising the cases where the court has found lawful act duress

17. The three earlier cases, Williams v Bayley, Kaufman v Gerson and Mutual Finance Ltd, were all cases in which the court treated the attempt by the party to uphold or enforce the contract as being unconscionable because of that party’s behaviour. In Borrelli, the Board described Mr Ting’s conduct as unconscionable and treated “illegitimate” as a synonym for unconscionable. In that case and The Cenk K it was the combination of (i) the existence of legal claims by B against A and (ii) the manoeuvring by A of B by reprehensible means into a vulnerable position where it had no alternative but to waive its pre-existing rights that amounted to illegitimate pressure.

18. It is noteworthy that in Borrelli, at paras 32 and 35, Lord Saville placed emphasis on Mr Ting’s breach of his duty as an officer of the insolvent company and his dishonest behaviour in concluding that the pressure which he applied to the directors was illegitimate. Similarly, in The Cenk K, Cooke J focused not only on the ship owners’ prior breach of contract but also on their subsequent “misleading activity”: the context of the demand was that the owners had induced the charterers to rely on the owners’ assurances to their detriment.

(4)	The influence of equity on lawful act duress

19. The role of equity in the development of the common law of duress is apparent from wider case law in which there was no finding of lawful act economic duress. In Barton v Armstrong [1976] AC 104, 121, a case which concerned unlawful threats of violence, Lord Wilberforce and Lord Simon of Glaisdale in a dissenting judgment which has been quoted in later judgments, discussed the nature of illegitimate pressure. They stated:

“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)

20. The ideas of an improper motive for action or illegitimate pressure are closely aligned with the equitable concept of unconscionability. In Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366 Lord Diplock discussed the development of the common law of economic duress. He stated (p 384) that the rationale for this development of the common law was that a person’s apparent consent to a contract had been induced by pressure exercised upon him by the other party “which the law does not regard as legitimate” with the result that the consent was treated as revocable. He continued:

“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)

21. In Huyton S A v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Law Rep 620 Mance J at p 637 quoted the judgment of McHugh JA in the Supreme Court of New South Wales in Crescendo Management Pty Ltd v Westpac Banking Corpn (1988) 19 NSWLR 40, 46, to which Lord Goff referred in Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) [1992] 2 AC 152: “Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct.” (Emphasis added) Mance J made a similar equation between illegitimate pressure and unconscionable conduct at the end of his judgment (p 642) in which he stated that the pressure which Huyton applied was not a sufficiently significant cause of the agreement for it to be unconscionable for Huyton to insist on the agreement.

22. In Borrelli, Lord Saville referred to Mr Ting’s conduct as “unconscionable”. In The Cenk K, Cooke J (paras 34 and 35) referred to Borrelli and its reference to unconscionable conduct and to the textbooks which supported the view that the courts were willing to apply “a standard of impropriety”. Lord Saville and Cooke J used the term “unconscionable” to describe the pressure applied by the person seeking to enforce the contract. The standard of impropriety is the high standard of unconscionability.

23. The place of lawful act economic duress in English law needs to be seen against the backdrop of the remedies which equity already provides. Unconscionability is not an overarching criterion to be applied across the board without regard to context. Were it so, judges would become arbiters of what is morally and socially acceptable. Equity takes account of the factual and legal context of a case and has identified specific contexts which call for judicial intervention to protect the weaker party. For example, the equitable doctrine of undue influence may result in a contract being set aside when two persons have a relationship in which A has acquired influence or ascendancy over B and A takes unfair advantage of its influence or ascendancy: Royal Bank of Scotland Plc v Etridge (No 2) [2002] 2 AC 773, paras 6-8 per Lord Nicholls of Birkenhead. It applies typically where there is a relationship of trust and confidence between A and B which A exploits to the detriment of B: “Chitty on Contracts” (ed Hugh Beale 33rd ed (2018)), paras 8- 058 to 8-059.

24. Similarly, the equitable doctrine of unconscionable bargains has been applied where B is at a serious disadvantage relative to A through “poverty, or ignorance, or lack of advice or otherwise” so that circumstances existed of which unfair advantage could be taken; A exploited B’s weakness in a morally culpable manner; and the resulting transaction was not merely hard or improvident but overreaching and oppressive: Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 WLR 87, 94-95, per Peter Millett QC, sitting as a deputy High Court judge. See also “Snell’s Equity” (John McGhee and Steven Elliott eds, 34th ed (2019), para 8-042). Examples of unconscionable transactions include circumstances in which A knowingly negotiates an agreement with B while B is elderly, unwell and intoxicated (Blomley v Ryan (1954) 99 CLR 362) and where a poor, illiterate and unwell person is induced to enter into a disadvantageous transaction without advice and in great haste (Clark v Malpas (1862) 4 De GF & J 401; 45 ER 1238). In Fry v Lane (1888) 40 Ch D 312, Kay J summarised the then existing case law in these terms (p 322): “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.” He held that the circumstances of poverty, ignorance and lack of independent advice impose on the purchaser the burden of showing that the purchase was fair, just and reasonable. Unequal bargaining power does not suffice; it is necessary for the claimant to show that unconscientious advantage has been taken of his or her disabling condition or circumstances: Boustany v Pigott (1993) 69 P & CR 298 (JCPC) at p 303 per Lord Templeman. Extortionate bargains can be struck down or varied in other circumstances; see, for example, The Port Caledonia and the Anna [1903] P 184 in which the court drastically reduced a claim for salvage where a ship’s captain in an emergency had been forced to accept an extortionate offer from a tug captain for the provision of salvage services. But the rules relating to salvage may depend on specialties of maritime law: “Chitty on Contracts” (above), para 8-048.

25. While there is an overlap between duress as it has developed in English law and the equitable doctrines of undue influence and unconscionable bargains, it is of note that under neither equitable doctrine is inequality of bargaining power sufficient of itself to entitle B to relief.

(5)	The absence in English law of a doctrine of inequality of bargaining power

and of a principle of good faith in contracting

26. It is not in dispute that there is in English common law no doctrine of inequality of bargaining power in contract, although such inequality may be a relevant feature in some cases of undue influence: National Westminster Bank Plc v Morgan [1985] AC 686, 708 per Lord Scarman. As Lord Scarman observed in The Universe Sentinel (p 401), when he referred to the judgment of Lord Wilberforce and Lord Simon in Barton v Armstrong, in commercial life many acts are done under pressure and sometimes overwhelming pressure. In negotiating a commercial contract each party to the negotiations seeks to obtain contractual entitlements which he or she does not possess unless and until the parties agree the terms of the contract. Inequality of bargaining power means that one party in the negotiation of a commercial contract may be able to impose terms on a weaker party which a party of equal bargaining power would refuse to countenance. Equally, a party in a strong bargaining position, such as a monopoly supplier, may refuse outright to enter into a contract which the weaker party desires or may impose terms which the weaker party considers to be harsh. The courts have taken the position that it is for Parliament and not the judiciary to regulate inequality of bargaining power where a person is trading in a manner which is not otherwise contrary to law. See for example Hilton v Eckersley (1855) 6 E & B 47, 74-75; 119 ER 781, 792 per Baron Alderson; Mogul Steamship Co Ltd v McGregor, Gow & Co [1892] AC 25, 36 per Lord Halsbury LC; OBG Ltd v Allan [2007] UKHL 21; [2008] AC 1, para 56 per Lord Hoffmann; CTN (above), at p 717 per Steyn LJ, and in this case, at paras 103 and 107 per David Richards LJ.

27. The English law of contract seeks to protect the reasonable expectations of honest people when they enter into contracts. It is an important principle which is applied to the interpretation of contracts: Lord Steyn, “Contract law: Fulfilling the reasonable expectations of honest men” (1997) 113 LQR, 433-442, 433; and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 771A per Lord Steyn. But, in contrast to many civil law jurisdictions and some common law jurisdictions, English law has never recognised a general principle of good faith in contracting. Instead, English law has relied on piecemeal solutions in response to demonstrated problems of unfairness: Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433, 439 per Bingham LJ; MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789; [2017] 1 All ER (Comm) 483, para 45 per Moore-Bick LJ.

28. The absence of these doctrines restricts the scope for lawful act economic duress in commercial life. In chapter 5 of his book, “The Use and Abuse of Unjust Enrichment” (Oxford 1991) Professor Jack Beatson (later to become Beatson LJ) discussed the development of the modern doctrine of economic duress and the severe limitations on its application in commercial negotiation. At pp 129-130 he explained the basic approach of the common law in these terms:

“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.”

He suggested (p 134) that the scope for lawful act duress in contractual negotiations was “extremely limited”. I agree.

29. “Anson’s Law of Contract”, 31st ed (2020) (J Beatson, A Burrows and J Cartwright eds) similarly recognises this restrictive approach to the law of duress in contractual negotiations (p 379, ch 10.2(d)):

“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.”

30. Against this commercial background the pressure applied by a negotiating party will very rarely come up to the standard of illegitimate pressure or unconscionable conduct. It will therefore be a rare circumstance that a court will find lawful act duress in the context of commercial negotiation.

(6)	The approach of other common law jurisdictions to economic duress

31. A similar picture of circumspection in the application of lawful act duress in

commercial negotiations emerges from a review of judgments in several leading
common law jurisdictions.

32. As David Richards LJ demonstrated in his judgment in this case (paras 79- 82), no clear picture of the existence and boundaries of lawful act duress has emerged throughout Australia. The Supreme Court of New South Wales recognised lawful act duress in Crescendo Management (above). McHugh JA’s views in that case have been cited with approval by the Queensland Court of Appeal (Mitchell v Pacific Dawn Pty Ltd [2011] QCA 98, paras 50-52), the Court of Appeal of Western Australia (Electricity Generation Corpn (trading as Verve Energy) v Woodside Energy Ltd [2013] WASCA 36, paras 24-25, 174-176; see also Morgan Stanley Wealth Management Australia Pty v Detata (No 3) [2018] WASC 32, paras 236- 237), and the Court of Appeal of Victoria (Doggett v Commonwealth Bank of Australia (2015) 47 VR 302, para 73; see also Braam v BBC Hardware [2020] VSCA 164, para 82). But the Court of Appeal of New South Wales in Australia and New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149, para 66, and in May v Brahmbhatt [2013] NSWCA 309, paras 39-40, rejected the concept of lawful act duress, confining duress to threatened or actual unlawful conduct, thereby leaving the weaker party to invoke the equitable doctrines of undue influence and unconscionable transactions if it can.

33. The Australian textbook, Edelman and Bant, “Unjust Enrichment”, 2nd ed

(2016), p 217, approves of a restrictive approach to the undermining of commercial
contracts which were entered into as a result of lawful commercial threats:

“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.”

The authors’ reference to disproportionality has not been mirrored in English law but the emphasis on the need to avoid conflict with statutory competition law echoes concerns expressed in English case law that the regulation of inequality of bargaining power should as a general rule fall to Parliament. Further, the authors’ recognition that there might be scope for non-commercial threats to fall within the doctrine of lawful act duress is salutary as the control of such threats by the common law would not cut against the grain of statutory regulation of unfair contract terms or consumer contracts.

34. The courts in New Zealand have recognised lawful act duress, adopting the approach of the House of Lords in The Universe Sentinel, but have taken a restrictive approach to it. Like the English courts, the courts in New Zealand have held that pressure is commonplace in commercial negotiation and only illegitimate pressure can support a case of duress: McIntyre v Nemesis DBK Ltd [2010] 1 NZLR 463 (CA). Illegitimate pressure has been equated with unconscionable conduct: Magsons Hardware Ltd v Concept 124 Ltd [2011] NZCA 559. More recently, the New Zealand Court of Appeal in Dold v Murphy [2020] NZLR 313 held that the doctrine of lawful act duress does not provide a remedy against hard-nosed commercial self- interest without more. The Court of Appeal rejected a claim of lawful act duress in circumstances where a minority shareholder, who had 6.2% of a company’s shares, successfully demanded to be paid considerably more than the proportionate value of his shareholding when the other two shareholders, who between them held 93.8% of the shares, wished to accept a particularly valuable offer for all of the shares in the company. The court held that a threat not to enter into a contract, other things being equal, was most unlikely to be an unlawful or illegitimate act. In that case, Mr Murphy’s opportunistic behaviour was not unlawful and the question of the genuineness of his belief in his entitlement did not arise: “he was entitled to act in his own self-interest, even if his actions were both unexpected and ungenerous.”

35. This court was also referred to a judgment of the Court of Appeal of Singapore: BOM v BOK (2018) SGCA 83; (2018) 21 ITELR 607. This case was not concerned with commercial contracts or directly with the law of duress. It concerned a deed of trust which a husband had been induced to sign by his wife by means of misrepresentation and undue influence. The deed was set aside for mistake and undue influence, and as an unconscionable transaction in that the husband was suffering from an infirmity and the wife had to show that the transaction had been fair, just and reasonable. The case is indirectly relevant to this appeal in so far as it discussed and rejected a submission that Singapore law should adopt a new umbrella doctrine of unconscionability which subsumed duress and undue influence. Andrew Phang Boon Leong JA, delivering the judgment of the court, recognised, in paras 169-179, the linkages between the doctrines of undue influence and unconscionable bargain and the similarities in substance between duress and undue influence. Duress in Singapore law involves the exertion by a party of illegitimate pressure on the other party in the form of a threat which coerces the will of the other. Undue influence in Singapore law involves the plaintiff showing that he was suffering from an infirmity that the other party exploited in procuring the transaction. If that requirement is satisfied, the defendant has the burden of demonstrating that the transaction was fair, just and reasonable (para 142). The judge rejected an umbrella doctrine of unconscionability principally because there were no practically workable legal criteria which the court could use to determine what amounts to unconscionable behaviour that vitiates a contract. An umbrella doctrine, he said, would lead to excessive subjectivity, which would engender excessive uncertainty and unpredictability and would undermine the sanctity of contract.

36. While making clear the danger of judicial subjectivity if one were to adopt a

general criterion of morally reprehensible conduct, the Singapore Court of Appeal
did not discuss the meaning of “illegitimate pressure” in duress.

37. The Supreme Court of Canada has recognised the existence of economic duress as a potential defence to contractual enforcement in Martel Building Ltd v Canada [2000] 2 SCR 860, para 70 but the substantive case law is at the level of the provincial courts of appeal. Canadian jurisprudence, such as the judgments of the Court of Appeal for Ontario in Stott v Merit Investment Corpn (1988) 63 OR (2d) 545 and in Techform Products Ltd v Wolda (2001) 206 DLR (4th) 171, has considered English jurisprudence and jurisprudence of the Board, such as in The Universe Sentinel and Pao On v Lau Yiu Long [1980] AC 614, and has required illegitimate pressure as a component in the doctrine. In Techform Products, which concerned the ownership of inventions, the Court of Appeal (paras 34-38) referred to CTN, attached weight to the bona fide belief by the company that it owned the inventions in dispute, and saw as an important consideration the fact that the consultant had been allowed to take away the draft agreement, giving him ample opportunity to obtain legal advice. In Stott an employee in an investment firm was unexpectedly confronted by his manager without notice and given no opportunity to consider his position or consult a lawyer before being required to sign a contract to pay off a debt owed to the company by a client in a context where he was justifiably fearful for his job. The court would have treated the case as one of economic duress and given a remedy but for the claimant’s subsequent conduct which approbated the contract. In Greater Fredericton Airport Authority Inc v NAV Canada (2008) 290 DLR (4th) 405 the Court of Appeal of New Brunswick was critical of the importation from English law of the concept of illegitimate pressure as a condition precedent to a finding of economic duress, principally because of the lack of clarity as to when pressure moved from being legitimate to being illegitimate (paras 35-50 per Robertson JA). The Newfoundland and Labrador Court of Appeal followed Robertson JA’s approach in Fredericton in Burin Peninsula Community Business Development Corpn v Grandy (2010) 327 DLR (4th) 752. The approach of the Court of Appeal for Ontario appears to be the dominant line of authority, but the decision of the Canadian Supreme Court in Bhasin v Hrynew [2014] 3 SCR 494 to recognise a general organising principle of good faith in contractual performance may have a significant influence on the direction of Canadian jurisprudence on the doctrine of economic duress. See Brandon Kain and Justin Nasseri, “Economic duress after Bhasin v Hrynew: does the organizing principle of good faith offer a new framework?” Archibald and Scott, Annual Review of Civil Litigation 2016. S M Waddams, “The Law of Contracts”, 7th ed (2017) concludes that the courts can give relief from provisions in agreements which are “highly unreasonable or very unfair” and that the test for duress is one of unfairness or unconscionability: “whether the promisee has taken unfair advantage of inequality of bargaining power” (p 354, para 514 and p 358, para 520).

38. In the United States the Restatement (Second) of Contracts (1981, June 2020

update), which the American Law Institute produced, discusses when a threat is
improper. It states in section 176, so far as relevant:

“(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 first heading addresses unlawful act duress. The second heading is the equivalent of the three lawful act duress cases to which I referred in paras 5-9 above. The fourth heading is influenced by the general duty of good faith and fair dealing in contract (viz Uniform Commercial Code para 1-304; Restatement (Second) of Contracts section 205), which does not have its counterpart in English law. Little guidance can therefore be gained from the fourth heading in the Restatement on the question of lawful act duress in English law.

39. In summary, several jurisdictions, such as Australia, New Zealand and Singapore, have adopted a circumspect approach to economic duress and lawful act duress. Jurisdictions with a general requirement of good faith in contract, such as Canada and the United States, may be expected to be more open to a claim of economic duress in the context of what Lord Burrows has described as a “bad faith demand”.

(7)	CTN Cash and Carry Ltd and the “bad faith demand”

40. Before turning to the judgment of the Court of Appeal in this appeal, I examine the earlier judgment of the Court of Appeal in CTN Cash and Carry Ltd [1994] 4 All ER 714 which featured prominently in the reasoning of David Richards LJ in his admirable judgment. In CTN, in contrast with the five judgments which I have discussed in paras 5-17 above, the Court of Appeal found that the impugned contract had not been obtained by duress.

41. CTN Cash and Carry Ltd (“CTN”) traded at arm’s length with Gallaher Ltd (“Gallaher”) from whom it purchased consignments of cigarettes. Gallaher was the sole distributor in England of certain popular brands of cigarettes. Gallaher was not contractually bound to sell cigarettes to CTN and each sale was a separate contract on Gallaher’s standard terms of business. Gallaher gave credit facilities to CTN which it could withdraw at its discretion at any time. The manager of one of CTN’s warehouses ordered a consignment of cigarettes which Gallaher in error delivered to another of CTN’s warehouses. When the mistake was discovered, Gallaher agreed to collect and deliver the consignment to the correct warehouse. But before that could be done, the entire consignment of cigarettes was stolen. Gallaher, believing, erroneously, that the goods were at CTN’s risk at the time of the theft, demanded that CTN pay the purchase price of the consignment. CTN initially refused to pay but paid the contractual sum for the purchase when Gallaher threatened to withdraw its credit facilities in future dealings. CTN raised legal proceedings to recover the £17,000 which it had paid, alleging that it had paid the sum under economic duress. The judge at first instance held that CTN had failed to make out a case for economic duress and the Court of Appeal dismissed CTN’s appeal.

42. Steyn LJ delivered the first judgment. He identified three distinctive features of the case. First, he observed (p 717h-j) that the dispute arose out of arm’s length commercial dealings between two trading companies. While Gallaher was in a sense in a monopoly position as the sole supplier of the brands, the control of monopolies was a matter for Parliament and the common law did not recognise the doctrine of inequality of bargaining power in commercial dealings. He stated: “The fact that the defendants were in a monopoly position cannot therefore by itself convert what is not otherwise duress into duress.” Secondly, he observed that Gallaher could lawfully refuse to enter into any future contracts with CTN for any reason or for no reason at all and could similarly lawfully refuse to grant credit. The third characteristic of the case, which he regarded as “critically important”, was that Gallaher thought in good faith that the goods were at CTN’s risk when they were stolen: “[Gallaher’s] motive in threatening withdrawal of credit facilities was commercial self-interest in obtaining a sum that they considered due to them” (p 718c). The combination of those three features meant that CTN’s claim failed. Steyn LJ warned of the risk of introducing uncertainty into the commercial bargaining process: “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” (p 719b-c). He concluded:

“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.”

Farquharson LJ and Sir Donald Nicholls V-C agreed. The latter expressed concern at the outcome, which was that Gallaher retained the money notwithstanding that the basis on which it had sought and insisted on payment had since been shown to be false, and wondered if a claim might lie in unjust enrichment.

43. This judgment, although an important steppingstone in the development of the doctrine of lawful act duress and cited in later cases, is authority for what is not such duress and not for what is. It is unquestionably correct in its conclusion that CTN’s payment was not recoverable on the ground of duress. Lord Burrows in his judgment sees an implication in the Court of Appeal’s reasoning that if Gallaher had sought the payment in bad faith and had exploited their monopoly position in the knowledge that the money was not due, the money would have been recoverable on the basis of economic duress. Steyn LJ’s statement (p 718b-c) that Gallaher’s bona fide belief that the goods were at the risk of CTN when they were stolen was “a third, and critically important, characteristic” of the case readily supports that view. Lord Burrows also derives support for that conclusion from (i) the judgment of David Richards LJ in this case and (ii) Mitchell, Mitchell and Watterson, “Goff and Jones on the Law of Unjust Enrichment”, 9th ed (2016) who say at para 10-70:

“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.”

44. Although it is not necessary in order to determine this appeal to decide whether that is correct, I do not think that the Court of Appeal would have been right so to decide. The present case can be determined by applying the analysis of lawful act duress set out in paras 2-30 above, which is anchored in established legal principles. The analysis in the preceding paragraph is, with respect, not so anchored. As I have said (paras 26-30 above), there is no doctrine of inequality of bargaining power and no general principle of good faith in contracting in English law. A commercial party in negotiation with another commercial party is entitled to use its bargaining power to obtain by negotiation contractual rights which it does not have until the contract is agreed. A powerful commercial party, such as a monopoly supplier or monopoly purchaser, can impose onerous terms, for example demanding a premium, as a condition for entering into a transaction with another party. Steyn LJ does not suggest otherwise. The implication of his judgment may be that the dishonest assertion of a pre-existing entitlement to payment accompanied by a threat to carry out a lawful act, such as to withdraw credit arrangements on future contracts or to refuse to enter into further contracts, could amount to lawful act duress as a form of an abuse of right.

45. Lord Burrows would not confine lawful act duress to a claim based on a dishonest assertion by A of a pre-existing legal entitlement to payment which was implicitly the subject matter of the Court of Appeal’s discussion in CTN Cash and Carry Ltd. Instead, he argues that A’s demand for a waiver by B of a claim against A would amount to lawful act economic duress where (i) A did not genuinely believe that it had a defence to the claim - ie his “bad faith demand”, and (ii) A has deliberately created or increased B’s vulnerability to that demand.

46. In my view this would extend the doctrine of lawful act duress well beyond

the position reached in the five cases which I have discussed in which such a claim
succeeded.

47. Dealing, first, with CTN Cash and Carry Ltd, the circumstance which Steyn LJ appears to have envisaged, and which persuaded David Richards LJ in this case to recognise the existence of lawful act duress if the demand were made in bad faith, was simply the extreme inequality of bargaining power between A and B without any manoeuvring by A to create B’s vulnerability in order to extract a concession.

48. A “bad faith demand” based on an asserted pre-existing entitlement may not be a rare occurrence in commercial life. Discreditable behaviour can be a feature of commercial activity. For example, it appears from the judgment of Sir Donald Nicholls V-C in CTN that, at the time of the hearing in the Court of Appeal, Gallaher had declined to repay the price of the stolen cigarettes although it knew by then both that its prior good faith demand was wrong in law and that it had no right to the money in dispute. There may therefore be a mischief which the law could address. But the extension of lawful act duress which may be implicit in Steyn LJ’s judgment in CTN Cash and Carry Ltd would nonetheless give rise to at least three difficulties.

49. First, it would be difficult to anchor the extension in any recognised legal principle. Where B is induced by A’s fraudulent representation to meet its demand, B may have a claim against A under the tort of deceit. But that is not the circumstance envisaged in CTN or by the Court of Appeal in this case. Where B is induced to meet A’s demand because of the stark inequality of bargaining power which gives B no effective choice but to meet the demand which B knows is not justified, it is not obvious to me that, without more, B could have a claim for economic duress in the absence of a general principle of good faith in contracting or a doctrine of imbalance of bargaining power, neither of which currently exists. It is difficult in principle to distinguish such a circumstance from a circumstance in which A makes an exorbitant demand in the course of negotiations as a condition for entering into contractual relations with B.

50. Secondly, in the absence of an underlying principle, the extension of lawful act duress in this way would create unwanted uncertainty. There is, in my view, force in the concern that the extension of the concept of lawful act duress would risk creating unacceptable uncertainty in the sphere of commercial transactions: see Professor Graham Virgo, “The Principles of the Law of Restitution”, 3rd ed (2015), pp 215-221. Lord Burrows seeks to avoid such uncertainty through the construct of the bad faith demand, but I do not accept that, without more, lawful act economic duress would exist even if there were such a bad faith demand. In my view the doctrine is more limited in the context of commercial relations.

51. Thirdly, the extension of lawful act duress in this way might be of limited utility. This is because, first, commercial organisations may enter into a dispute or commence litigation without an informed idea of their legal rights or any intention of seeking judicial resolution but with the aim of reaching a settlement of the dispute on better terms than are currently on offer. The vast majority of commercial disputes do not go to trial and are not expected to do so. Each organisation may have to reach its own view as to its entitlements and resolve the dispute accordingly. Secondly, it would be very difficult for B to establish its case because B would have to demonstrate A’s subjective bad faith. The application of legal rules to a particular factual circumstance, such as when risk passes on a contract of sale, commonly involves questions of legal judgment on which legal advisers may reasonably differ. A party may be advised that it has an arguable case but that the application of the law to the facts of that case is uncertain. A party may proceed to make a claim on the basis of legal advice of a percentage chance of success. What is envisaged in the “bad faith demand” requirement in this context is that there is little, if any, uncertainty as to A’s lack of entitlement, and that A makes its demand in the knowledge that it does not have the legal entitlement which it claims. B would succeed in its claim for lawful act duress only if it established that A did not genuinely believe that it had that entitlement.

52. I therefore do not accept that the lawful act doctrine could be extended to a circumstance in which, without more, a commercial organisation exploits its strong bargaining power or monopoly position to extract a payment from another commercial organisation by an assertion in bad faith of a pre-existing legal entitlement which the other organisation believes or knows to be incorrect.

53. Lord Burrows would extend the doctrine further. In his view Borrelli and The Cenk K support the conclusion that a demand by A that B waive a claim against it would be a “bad faith demand” if A did not genuinely believe that it had a defence to the claim. If A then used its bargaining power and nothing more to make B vulnerable to its demand or to increase B’s vulnerability, the combination of the bad faith demand and the manoeuvring would, he argues, be sufficient to establish lawful act duress. I respectfully disagree for four reasons.

54. First, the demand for a waiver, to which A must know that it has no prior entitlement, is in principle no different from the demand for a sum of money as a pre-condition for entering into contractual relations in the context of a commercial negotiation, which I mentioned in para 44 above. Lord Burrows in para 125 of his judgment accepts that economic duress could not be made out in the latter circumstance. If the demand for money, which is supported by the assertion of A’s bargaining power, does not give rise to a claim for duress, why should a demand for a waiver of a valid claim which is backed up in the same way?

55. Secondly, the absence of an identifiable principle to distinguish those two

circumstances would increase the undesirable uncertainty in commercial
transactions which I mentioned in para 50 above.

56. Thirdly, and in any event, bad faith plays a wider role in lawful act duress than merely the absence of belief in an entitlement to a pre-existing right or in the invalidity of a claim for which A seeks a waiver. In both Borrelli and The Cenk K the conduct of A by which A applied pressure to B involved bad faith or behaviour which was similarly reprehensible: para 18 above. In both cases it was the combination of the probable or at least possible validity of B’s claim against A combined with A’s behaviour of that nature which gave rise to the court’s conclusion that the waiver had been obtained through the application of illegitimate pressure. In other words, bad faith is potentially relevant both to the content of the demand and to the context in which A makes its demand. To my mind, the two cases do not support Lord Burrows’ model.

57. Fourthly, there is no support in either Borrelli or The Cenk K for the proposition that the mere assertion of bargaining power, such as a lawful threat to terminate an existing contract or to reduce the supply of goods under the contract in a way which the contract allowed, could without more amount to illegitimate pressure. Lord Burrows considers that PIAC’s deliberate act of cutting its ticket allocation, thereby increasing Times Travel’s vulnerability to its demand for a waiver of a claim that it was in breach of contract, was an act which was beyond the mere exercise of monopoly power and would have amounted to illegitimate pressure if PIAC had known that it had indeed broken its contract. I respectfully disagree and take a narrower view of the scope of lawful act economic duress in this context. The reduction of the ticket allocation was a hard-nosed exercise of monopoly power, which, in the absence of a doctrine of unequal bargaining power, could not by itself amount to illegitimate pressure. Something more was needed, such as the reprehensible characteristics of the behaviour in Borrelli and The Cenk K to which I have referred in para 18 above. As I have said (para 28 above) the scope for lawful act economic duress is extremely limited in the sphere of commercial transactions.

“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.”

130. The difficulties with these alternative approaches confirm my belief that, in the context of a demand for what is claimed to be owing or for a waiver of a claim, the “bad faith demand” requirement provides the appropriate certainty that is essential for the recognition of lawful act economic duress.

(9)	An alternative strategy put forward by Mr Jones

131. Mr Jones put forward, as an alternative to his primary submission (that the reasoning of the Court of Appeal was correct), a line of argument which would deny the claim in this case for different reasons than those relied on by the Court of Appeal (ie for reasons different from the non-establishment of the “bad faith demand” requirement). His alternative submission was that, unless the criminal law offence of blackmail has been committed, lawful act duress should not exist. In particular, he submitted that Borrelli v Ting and Progress Bulk Carriers are better regarded as cases of unlawful act duress not lawful act duress. This alternative line of argument has some attractions. But, ultimately, I have rejected that alternative submission for the following main reasons:

(i)        As I have explained at paras 107 and 110-111, Borrelli v Ting and

Progress Bulk Carriers can be correctly viewed as cases on lawful act duress.

(ii) It is not clear how exactly a direct reliance on the crime of blackmail (at least without further elaboration) would work in the civil law context. Mr Jones argued that blackmail should be recognised as an example of “unlawful means”. But that involves the circularity referred to in para 88 above.

(iii) Mr Jones’s submission would involve largely ignoring the Court of Appeal’s reasoning in CTN Cash and Carry which accepted that there can be lawful act economic duress without reference to the crime of blackmail.

(iv) Mr Jones’s submission would also run contrary to my view, explained at para 122 above, that, had there been a bad faith demand in CTN Cash and Carry, economic duress would have been made out. Similarly, Mr Jones’s submission would also run contrary to my view that, on the facts of this case, had PIAC’s demand been made in bad faith, the threat would clearly have been illegitimate.

(v) Looking across the range of past cases in English law (including some

that have been classified as cases of actual undue influence) they support the
view that lawful act duress does exist. See paras 89-91 above.

7.         The judgment of Lord Hodge

132. Since writing this judgment I have had the benefit of reading the judgment of Lord Hodge. There is a large measure of agreement between us. Where we fundamentally differ is that, in deciding that there was no lawful act economic duress on the facts of this case, I regard it as essential that, on Warren J’s findings, PIAC was not acting in bad faith in the specific sense relating to PIAC’s genuine belief as to its not being contractually liable for the unpaid commission that was being waived. That is what the Court of Appeal’s decision turned on. It is my view that, had there been a contrary finding of bad faith, in that specific sense, TT’s claim for lawful act economic duress would here have succeeded. While already in a strong position by reason of having a monopoly over the supply of tickets for direct flights between the UK and Pakistan, PIAC withheld a very large sum of commission owing to TT (the principal sum claimed was over £1.2m) and then went further by, for example, suddenly cutting TT’s normal ticket allocation from 300 to 60 thereby increasing TT’s vulnerability which it was then able to exploit by making the demand for the waiver (see above paras 69-70). All this went beyond the mere use of monopoly power. On the face of it, PIAC’s conduct seems to fall within Lord Hodge’s lawful act duress category comprising “using illegitimate means to manoeuvre the claimant into a position of weakness to force him to waive his claim”. The fact that the claimant was already in a weak position (because of the monopoly) cannot make the claim for lawful act economic duress less deserving than if the claimant had been in a stronger bargaining position. It follows that, in my view, contrary, as I understand it, to that of Lord Hodge, it is the “bad faith demand” requirement, as I have explained it, that is critical to the decision that there was no lawful act economic duress in this case.

133. With great respect, I am also very concerned that, without any focus on the “bad faith demand” requirement, defined in the specific sense that I have set out, and with instead the essential guide being that the defendant’s conduct must be “reprehensible” or “unconscionable” or using “illegitimate means” (which is, by definition, distinct from unlawful means), one will be permitting lawful act economic duress to create considerable uncertainty in the realm of commercial contracts. While not supporting a “bad faith demand” requirement, Lord Hodge also refers at some points to “bad faith” as being relevant (see, for example, paras 56 and 59) but it is not clear to me what Lord Hodge means by that and how that approach is consistent with his rejection of a “good faith dealing” principle. I have tried to make clear (see para 95) that I am precisely not advocating a general principle of good faith dealing; and the “bad faith demand” requirement that I have been relying on, and which David Richards LJ was also using in the Court of Appeal, is narrow and sharply defined.

134. Although unnecessary for this decision, we also differ in relation to what the outcome would have been in CTN Cash and Carry had the defendants known that they were not contractually owed the money they were demanding for the goods. In my view, if that had been the position, the claimants would have succeeded in their claim for restitution of the money paid based on lawful act economic duress. But Lord Hodge takes the contrary view.

135. Finally, Lord Hodge suggests, at para 54 of his judgment, that there is no principled difference between a demand for payment, based on a bad faith demand, and a demand for payment as a pre-condition to entering into a contract. With respect, the principled difference is that one involves bad faith, as I have defined it, but the other does not. I have sought to make clear in para 125 that the “bad faith demand” requirement is dependent on there being an existing legal right and duty between the parties. To try to apply it outside that context would risk unduly interfering with ordinary commercial bargaining; and it would deprive the requirement of its force as being underpinned by a workable standard of dishonesty and as providing a clear and certain means of controlling the scope of lawful act economic duress. It is also worth stressing that the root principle, to which one is seeking to provide a clear guide, is that the demand is unjustified so that the lawful act economic threat is illegitimate. At this stage in the law’s development, my strategy (see para 95 above) has been to set out a limited but clear and workable boundary for what constitutes an unjustified demand - so that a lawful act economic threat is illegitimate - in the context of the facts with which this case is concerned. Any incremental development of what the common law treats as an unjustified demand in relation to lawful act economic duress can in the future proceed cautiously, in the light of known facts, from that secure base.

8.         Conclusion

136.     One can summarise the analysis of the law set out in this judgment as follows:

(i) Lawful act duress, including lawful act economic duress, exists in

English law.

(ii) Three elements need to be established for lawful act economic duress: an illegitimate threat; sufficient causation; and that the threatened party had no reasonable alternative to giving in to the threat.

(iii) As the threat is lawful, the illegitimacy of the threat is determined by focusing on the justification of the demand.

(iv) A demand motivated by commercial self-interest is, in general, justified. Lawful act economic duress is essentially concerned with identifying rare exceptional cases where a demand, motivated by commercial self-interest, is nevertheless unjustified.

(v) In relation to a demand for a waiver by the threatened party of a claim against the threatening party, a demand is unjustified, so that the lawful act economic threat is illegitimate, where, first, the threatening party has deliberately created, or increased, the threatened party’s vulnerability to the demand and, secondly, the “bad faith demand” requirement is satisfied. The demand is made in bad faith where the threatening party does not genuinely believe that it has any defence (and there is no defence) to the claim being waived.

137. In addition, I have explained that, although not necessary for the decision in this case, it is my view that, had the “bad faith demand” requirement been satisfied in CTN Cash and Carry, the demand would have been unjustified thereby rendering the lawful act economic threat illegitimate. That is, had the defendants not genuinely believed that the payment that they demanded from the claimants was contractually owed, it would have been recoverable by the claimants for economic duress.

138. Applying the analysis of the law summarised in para 136 to this case, my conclusion is that the decision of the Court of Appeal was correct largely for the reasons it gave (although it was unnecessary for it to have taken, what I have termed, the wider interpretation of CTN Cash and Carry). Lawful act economic duress was not made out on the facts of this case because the threatened lawful act was not coupled with a bad faith demand. On the facts found by Warren J, TT failed to establish bad faith by PIAC in the specific sense relating to PIAC’s genuine belief as to its not being contractually liable for the unpaid commission. The Court of Appeal correctly applied the “bad faith demand” requirement in this case. I would therefore dismiss the appeal.