Halpern v Halpern (No 2)
| Jurisdiction | England & Wales |
| Judge | Nigel Teare QC,Mr Nigel Teare QC |
| Judgment Date | 04 July 2006 |
| Neutral Citation | [2006] EWHC 1728 (Comm) |
| Docket Number | Case No: 2005 Folio 370 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 July 2006 |
[2006] EWHC 1728 (Comm)
[2006] EWHC 1642 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Nigel Teare Qc
Case No: 2005 Folio 370
Romie Tager QC and Juliette Levy (instructed by Shammah Nicholls) for the Claimants
David Berkley QC and Richard Selwyn Sharpe (instructed by Simon Bergin) for the Defendants
Hearing dates: 24 May 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is the trial of a preliminary issue ordered to be tried by Mr. Justice Christopher Clarke on 24 March 2006. The issue is one of law, namely, whether a party can avoid a contract procured by duress in circumstances where he cannot offer the other party substantial restitutio in integrum.
In this action the Claimants seek damages for breach of an agreement made on 11 March 2003 which compromised an inheritance dispute. The factual circumstances which have given rise to the dispute between the parties are set out in the judgment of Mr. Justice Christopher Clarke given on 24 March 2006. I need not recite them again but gratefully adopt his account of them.
One of the pleaded defences to the claim is that the compromise agreement was procured by duress. The question of law regarding restitutio in integrum arises because clause 4 of the compromise agreement requires that all documents relating to the agreement be destroyed. Mr. Justice Christopher Clarke said as follows:
"The act of destruction of the documents is one which has benefited the defendants and prejudiced the claimants. It can neither be undone nor reversed. Nor can any pecuniary relief put the claimants in as good a position as they would have been in if the agreement could have been rescinded and matters restored to the position in which they were before the agreement was made ie that the claimants and the dayanim retained their documents, unless, perhaps Mr. Lang had retained and is prepared to produce a copy of every material document. Accordingly restitutio in integrum would not appear to be possible. It is not however clear that an inability to make restitutio in integrum is a bar to avoidance of a contract on the ground of duress. Avoidance of a contract for duress (as opposed to rescission for undue influence) is a common law remedy. In essence the illegitimate pressure imposed on the victim renders his apparent consent revocable: Anson's Law of Contract, 274. If, after the illegitimate pressure has ceased to operate, the victim treats the contract as valid, he can no longer revoke it. Equity, as a condition of granting rescission where there has been undue influence would require restitutio, at least in substance. It does not however necessarily follow that, if the victim of duress has not affirmed the contract, he loses his right of revocation if he cannot restore the other party to substantially the same position. At any rate I decline on an application for summary judgment to rule that that is so."
On the hearing of the preliminary issue Mr. Romie Tager QC submitted that in order to rescind or avoid a contract on the grounds of duress at common law the party claiming the right to rescind or avoid on the grounds of duress had to be able to make restitutio in integrum, (or in modern terminology, counter restitution, see Dunbar Bank PLC v Nadeem [1998] 3 AER 876 per Millett LJ at p.884) to the other party. Further or alternatively, he relied upon the circumstance that in equity counter restitution was required. Mr. David Berkley QC submitted that the party claiming the right to rescind for duress at common law did not have to offer counter restitution. He further submitted that equitable principles could not be relied upon because the remedy of rescission in equity was an act of the Court and not, as it was at common law, an act of the party rescinding.
The legal dispute between the parties is reflected in passages in two textbooks. The Claimants' argument is supported by a passage in Duress, Undue Influence and Unconscionable Dealing by Professor Enonchong (2006) at para.28–012. The Defendants' argument is supported by a passage in The Law of Restitution by Professor Burrows 2 nd.ed. at pp.217–218.
However, in an unreported decision of the Court of Appeal, Dorimex and others v Visage Imports Limited given on 18 May 1999, the Vice-Chancellor, Sir Richard Scott, said, in relation to a plea of economic duress, that the trial judge, His Honour Judge Diamond QC, directed himself "impeccably" by reference to principles stated in Snell's Equity 29 th.ed. and Goff and Jones on the Law of Restitution.
The passage from Snell provided as follows:
" A person who rescinds a contract is entitled to be restored to the position he would have been in had the contract not been made. Hence, property must be returned, possession given up, and accounts taken of profits or deterioration."
The passage from Goff and Jones provided as follows:
We have already seen that an important limit to rescission is that there must be restitutio in integrum. The effect of this principle is that the plaintiff must "be in a position to offer and must formally tender restitutio in integrum"; but the court will also, when rescinding the contract, order the restoration to the plaintiff of benefits received by the defendant from him under the contract. There ought to be a giving back and a taking back on both sides."
The actual decision in Dorimex concerned the application of those principles to the facts of that case. For that reason the decision was not said to be binding upon this court with regard to the statement of principle and its application to a case of duress. However, the decision of the Court of Appeal to apply that statement of principle in a case of duress is plainly of strong persuasive authority that the defence of duress requires counter restitution.
Mr. Tager QC submitted that the Court of Appeal was right to say that rescission on the grounds of duress required an ability to give counter restitution. Mr. Berkley QC submitted that the application of the principle requiring counter restitution to a case of duress by the Court of Appeal was wrong and should not be followed.
In my judgment the common law remedy of rescission on the grounds of duress requires an ability to give counter restitution. My reasons for reaching that conclusion may be summarised as follows:
i) Rescission at common law on the grounds of fraudulent misrepresentation required an ability to give counter restitution.
ii) The logic of rescission is that the parties are put back into the position in which they would have been had there been no contract. That logic requires an ability to give counter restitution.
iii) Although no case has been found in which it was held that an ability to give counter restitution is required in order to rescind a contract on the grounds of duress there is no reason why the nature of the remedy of rescission or the circumstances in which it is available should differ depending upon whether the ground of rescission is fraud or duress.
In Clarke v Dickson (1858) EL.BL and EL 148 a claim was brought for money had and received by the purchaser of shares in a company. It was said that he had been induced to purchase the shares by a fraudulent misrepresentation but he failed in his action at common law. Erle J. said that:
"the plaintiff cannot avoid the contract under which he took the shares, because he cannot restore them in the same state as when he took them."
Crompton J. said:
"when once it is settled that a contract induced by fraud is not void, but voidable at the option of the party defrauded, it seems to me to follow that, when that party exercises his option to rescind the contract, he must be in a state to rescind it; that is, he must be in such a situation as to be able to put the parties into their original state before the contract…………….. The plaintiff must rescind in toto or not at all; he cannot both keep the shares and recover the whole price. That is founded on the plainest principles of justice. If he cannot return the article he must keep it, and sue for his real damage in an action on the deceit."
The same principle was stated in the House of Lords in the Scottish case of...
To continue reading
Request your trial
-
Halpern v Halpern (Nos. 1 and 2)
...appeal comes before us as one solely on the substance of the decision. Furthermore, the deputy judge's decision (which is reported at [2006] 3 WLR 946) now stands as the most recent judicial treatment of an issue of some general importance. If it is wrong, we should not leave it uncorrecte......
- R (Malik) v Waltham Forest Primary Care Trust
-
Rattle Plant Hire Ltd v Secretary of State for the Environment Food and Rural Affairs (No. 2)
...In this respect I was referred to Erlanger v. New Sombrero Phosphate Company (1878) 3 App Cases 1218 per Lord Blackburn at page 1278; Halpern v. Halpern [2007] 2 L1 Rep 56 at paragraphs 60, 62 and 75. The Defendant submits that as a matter of practical justice, it would be entirely wrong if......
-
Musawi v R E International (UK) Ltd and Others
...by Shia Sharia law. In the light of the Contracts (Applicable Law) Act 1990 and the decisions at first instance and on appeal in Halpern v Halpern [2007] EWCA Civ 291, as well as the decision of the Court of Appeal in Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] 1 WLR 1784......