QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| Progress Bulk Carriers Limited
|Tube City IMS L.L.C.
Paul Henton (instructed by Reed Smith LLP) for the Defendant
Hearing date: Thursday, 9th February and Friday 10th February 2012
Crown Copyright ©
The Hon. Mr Justice Cooke :
"On the basis of the findings of fact in the Award and Reasons, was the Settlement Agreement made between the parties on 28th April 2009 voidable for duress, and, in particular did [the owner's] conduct amount to the "illegitimate pressure" required to establish duress in law?"
The Facts found in the Award and Reasons
The Arbitrators' Conclusion of Law
"Clearly there was nothing unlawful in the sense of illegal or criminal in the position the Owners' representative adopted. However on the facts as we have found them to be we were left in no doubt that but for the pressure which the Charterers' representative was under on 28th April, with barges clocking up demurrage in the Mississippi and with a serious drop in the price of scrap such that his buyers/receivers were very unlikely to agree yet another variation of the sales contract without extracting an even fiercer price reduction, he would never have agreed to take m.v. Agia on the terms he did. Indeed by this very late stage he really had no reasonable alternative but to accept the vessel on the "take it or leave" it basis it was offered. We do so find, although we accepted Charterers' submission that there was almost certainly no need to have a "no reasonable alternative" ingredient in the mix (see Huyton v Cremer  1 Lloyds Rep 620). Accordingly we have no hesitation in concluding that the Charterers' representative agreement, albeit under protest, to a full and final settlement was voidable for economic duress. Indeed, having lulled the Charterers' representative into a full sense of security when he was in fact being quietly manoeuvred in a corner, we do not think it was appropriate or open for the Owners' to then produce their "take it or leave it" rabbit out of the hat."
"I also readily accept that the fact that the defendants have used lawful means does not by itself remove the case from the scope of the doctrine of economic duress. Professor Birks, in An Introduction to the Law of Restitution (1989) p 177, lucidly explains:
'Can lawful pressures also count? This is a difficult question, because, if the answer is that they can, the only viable basis for discriminating between acceptable and unacceptable pressures is not positive law but social morality. In other words, the judges must say what pressures (though lawful outside the restitutionary context) are improper as contrary to prevailing standards. That makes the judges, not the law or the legislature, the arbiters of social evaluation. On the other hand, if the answer is that lawful pressures are always exempt, those who devise outrageous but technically lawful means of compulsion must always escape restitution until the legislature declares the abuse unlawful. It is tolerably clear that, at least where they can be confident of a general consensus in favour of their evaluation, the courts are willing to apply a standard of impropriety rather than technical unlawfulness.'
And there are a number of cases where English courts have accepted that a threat may be illegitimate when coupled with a demand for payment even if the threat is one of lawful action (see Thorne v Motor Trade Association  3 All ER 157 at 160-161,  AC 797 at 806-807, Mutual Finance Ltd v John Wetton & Sons Ltd  2 All ER 657,  2 KB 389 and Universe Tankships Inc of Monrovia v International Transport Workers Federation  2 All ER 67 at 76, 89,  1 AC 366 at 384, 401). On the other hand, Goff and Jones Law of Restitution (3rd edn, 1986) p 240 observed that English courts have wisely not accepted any general principle that a threat not to contract with another, except on certain terms, nay amount to duress.
We are being asked to extend the categories of duress of which the law will take cognisance. That is not necessarily objectionable, but it seems to me that an extension capable of covering the present case, involving 'lawful act duress' in a commercial context in pursuit of a bona fide claim, would be a radical one with far-reaching implications. It would introduce a substantial and undesirable element of uncertainty in the commercial bargaining process. Moreover, it will often enable bona fide settled accounts to be reopened when parties to commercial dealings fall out. 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 inquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable. That is the inquiry in which we are engaged. In my view there are policy considerations which militate against ruling that the defendants obtained payment of the disputed in-voice by duress.
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'."
"The ingredients of actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract: see Universe Tankships Inc of Monrovia v International Transport Workers Federation  1 AC 366, 400B—E, and Dimskal Shipping Co SA v International Transport Workers Federation  2 AC 152, 165G. In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.
The question of law posed on the Appeal