Pakistan International Airline Corporation v Times Travel (UK) Ltd

JurisdictionEngland & Wales
Neutral Citation[2021] UKSC 40
Year2021
CourtSupreme Court
Supreme Court Times Travel (UK) Ltd and another v Pakistan International Airlines Corpn [2021] UKSC 40

2020 Nov 2, 3; 2021 Aug 18

Lord Reed PSC, Lord Hodge DPSC, Lord Lloyd-Jones, Lord Kitchin, Lord Burrows JJSC

Contract - Validity - Economic duress - Contract entered into following exercise of lawful pressure in good faith - Whether contract voidable on grounds of duress

The claimant travel agency, whose business was almost exclusively the sale of flight tickets for travel to and from Pakistan, was very largely dependent on its ability to sell tickets with the defendant airline, which was the only airline operating direct flights between the United Kingdom and Pakistan. When a number of the defendant’s agents brought claims against the defendant to recover substantial sums said to be due by way of commission, the defendant put pressure on the claimant not to join the claims. It cut the claimant’s normal ticket allocation from 300 to 60 tickets a fortnight, as it was entitled to do, and gave notice that it was terminating existing agency contracts. It offered each agent a new contract on terms that included a waiver of the agent’s claim for unpaid commission. The claimant reluctantly accepted those terms. Subsequently the claimant brought proceedings to recover the commission and other payments which it said were due under its previous contract. The judge allowed the claim, holding that the claimant was entitled to avoid the new contract on the grounds that it had been procured by economic duress, even though the defendant’s actions had been entirely lawful. The Court of Appeal reversed his decision, holding that the claimant was not entitled to avoid the new contract because it had not established bad faith on the part of the defendant.

On appeal by the claimant—

Held, dismissing the appeal, that the doctrine of lawful act economic duress existed in English common law as a ground for the rescission of a contract or the restitution of a non-contractual payment; that the elements of such duress were (i) the making of an illegitimate (albeit lawful) threat by one party, (ii) sufficient causation between the threat and the threatened party entering into the contract or making the non-contractual payment and (iii) the lack of any reasonable alternative to the threatened party giving in to the threat; that the illegitimacy of a threat was to be determined by focusing on the nature and justification of the demand made by the threatening party, having regard to, among other things, the behaviour of the threatening party (including the nature of the pressure it applied) and the circumstances of the threatened party; that since the law generally accepted that the pursuit of commercial self-interest was justified in commercial bargaining, a demand which was motivated by commercial self-interest would, in general, be justified; that, further, the question of whether a threat was illegitimate was not to be determined by applying a “range of factors” approach, nor by reference to a principle of good faith dealing; that (per Lord Reed PSC, Lord Hodge DPSC, Lord Lloyd-Jones and Lord Kitchin JJSC) a threat would be illegitimate if it amounted to the kind of reprehensible or unconscionable conduct which, in the context of the equitable doctrine of undue influence, had been judged to render the enforcement of a contract unconscionable; that, in the present case, where the defendant genuinely believed that it was not liable for breach of contract as a result of its failure to pay past commission, there had been no illegitimate threat; and that, accordingly, the claimant could not avoid the new contract (post, paras 13, 20, 28, 30, 52, 5861, 7879, 8692, 9599, 136, 138).

Borrelli v Ting [2010] Bus LR 1718, PC and Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] 2 All ER (Comm) 855 distinguished.

CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, CA considered.

Decision of the Court of Appeal [2019] EWCA Civ 828; [2020] Ch 98; [2019] 3 WLR 445 affirmed.

The following cases are referred to in the judgments:

Al Nehayan v Kent [2018] EWHC 333 (Comm); [2018] 1 CLC 216

Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 WLR 87; [1983] 1 All ER 944; [1985] 1 WLR 173; [1985] 1 All ER 303, CA

Astley v Reynolds (1731) 2 Str 915

Attorney General v R [2003] UKPC 22; [2003] EMLR 24, PC

Australia and New Zealand Banking Group Ltd v Karam [2005] NSWCA 344; 64 NSWLR 149

Aylesford (Earl of) v Morris (1873) LR 8 Ch App 484

BOM v BOK [2018] SGCA 83; 21 ITELR 607

Backhouse v Backhouse [1978] 1 WLR 243; [1978] 1 All ER 1158

Barton v Armstrong [1976] AC 104; [1975] 2 WLR 1050; [1975] 2 All ER 465, PC

Bhasin v Hrynew 2014 SCC 71; [2014] 3 SCR 494; 379 DLR (4th) 385

Blomley v Ryan (1954) 99 CLR 362

Borrelli v Ting [2010] UKPC 21; [2010] Bus LR 1718, PC

Boustany v Pigott (1993) 69 P & CR 298, PC

Braam v BBC Hardware Ltd [2020] VSCA 164

Burin Peninsula Community Business Development Corpn v Grandy 2010 NLCA 69; 327 DLR (4th) 752

CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, CA

Cavendish Square Holdings BV v Makdessi [2015] UKSC 67; [2016] AC 1172; [2015] 3 WLR 1373; [2016] 2 All ER 519; [2016] 2 All ER (Comm) 1; [2016] 1 Lloyd’s Rep 55, SC(E)

Clark v Malpas (1862) 4 De GF & J 401

Crescendo Management Pty Ltd v Westpac Banking Corpn (1988) 19 NSWLR 40

Cresswell v Potter (Note) [1978] 1 WLR 255

DSND Subsea Ltd (formerly DSND Oceantech Ltd) v Petroleum Geo-Services ASA [2000] BLR 530

Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) [1992] 2 AC 152; [1991] 3 WLR 875; [1992] ICR 37; [1991] 4 All ER 871; [1992] 1 Lloyd’s Rep 115, HL(E)

Doggett v Commonwealth Bank of Australia [2015] VSCA 351; 47 VR 302

Dold v Murphy [2020] NZCA 313; [2021] 2 NZLR 834

Electricity Generation Corpn (trading as Verve Energy) v Woodside Energy Ltd [2013] WASCA 36

Flying Music Co Ltd, The v Theater Entertainment SA [2017] EWHC 3192 (QB)

Fry v Lane (1888) 40 Ch D 312

Greater Fredericton Airport Authority Inc v Nav Canada (2008) 290 DLR (4th) 405

Hilton v Eckersley (1855) 6 E & B 47

Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620

Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433; [1988] 2 WLR 615; [1988] 1 All ER 348, CA

Kaufman v Gerson [1904] 1 KB 591, CA

MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789; [2017] 1 All ER (Comm) 483; [2016] 2 Lloyd’s Rep 494, CA

McIntyre v Nemesis DBK Ltd [2009] NZCA 329; [2010] 1 NZLR 463

Magsons Hardware Ltd v Concepts 124 Ltd [2011] NZCA 559

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; [1997] 2 WLR 945; [1997] 3 All ER 352, HL(E)

Marsden v Barclays Bank plc [2016] EWHC 1601 (QB); [2016] 2 Lloyd’s Rep 420

Martel Building Ltd v Canada 2000 SCC 60; [2000] 2 SCR 860; 193 DLR (4th) 1

May v Brahmbhatt [2013] NSWCA 309

Mitchell v Pacific Dawn Pty Ltd [2011] QCA 98

Mogul Steamship Co Ltd v McGregor, Gow & Co [1892] AC 25, HL(E)

Morgan Stanley Wealth Management Australia Pty Ltd v Detata (No 3) [2018] WASC 32

Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 KB 389

National Westminster Bank plc v Morgan [1985] AC 686; [1985] 2 WLR 588; [1985] 1 All ER 821, HL(E)

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705; [1979] 3 WLR 419; [1978] 3 All ER 1170; [1979] 1 Lloyd’s Rep 89

OBG Ltd v Allan [2007] UKHL 21; [2008] AC 1; [2007] 2 WLR 920; [2007] Bus LR 1600; [2007] 4 All ER 545; [2008] 1 All ER (Comm) 1, HL(E)

Occidental Worldwide Investment Corpn v Skibs A/S Avanti [1976] 1 Lloyd’s Rep 293

Patel v Mirza [2016] UKSC 42; [2017] AC 467; [2016] 3 WLR 399; [2017] 1 All ER 191; [2016] 2 Lloyd’s Rep 300, SC(E)

Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 WLR 435; [1979] 3 All ER 65, PC

Port Caledonia, The and the Anna [1903] P 184

Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm); [2012] 2 All ER (Comm) 855; [2012] 1 Lloyd’s Rep 501

Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773; [2001] 3 WLR 1021; [2001] 4 All ER 449; [2001] 2 All ER (Comm) 1061; [2002] 1 Lloyd’s Rep 343, HL(E)

Skeate v Beale (1841) 11 Ad & El 983

Stott v Merit Investment Corpn (1988) 48 DLR (4th) 288; 63 OR (2d) 545

Techform Products Ltd v Wolda (2001) 206 DLR (4th) 171; 56 OR (3d) 1

Thorne v Motor Trade Association [1937] AC 797; [1937] 3 All ER 157, HL(E)

Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366; [1982] 2 WLR 803; [1982] ICR 262; [1982] 2 All ER 67; [1982] 1 Lloyd’s Rep 537, HL(E)

Vaughan (Alf) & Co Ltd v Royscot Trust plc [1999] 1 All ER (Comm) 856

Williams v Bayley (1866) LR 1 HL 200, HL(E)

The following additional cases were cited in argument:

Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3481 (QB)

Essex County Council v UBB Waste (Essex) Ltd (No 2) [2020] EWHC 1581 (TCC); 191 Con LR 77

Law Debenture Trust Corpn plc v Ukraine [2018] EWCA Civ 2026; [2019] QB 1121; [2019] 2 WLR 655, CA

MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789; [2017] 1 All ER (Comm) 483; [2016] 2 Lloyd’s Rep 494, CA

Morley (trading as Morley Estates) v Royal Bank of Scotland plc [2020] EWHC 88 (Ch)

Rookes v Barnard [1964] AC 1129; [1964] 2 WLR 269; [1964] 1 All ER 367; [1964] 1 Lloyd’s Rep 28, HL(E)

Simantob v Shavleyan [2019] EWCA Civ 1105, CA

Smith v William Charlick Ltd (1924) 34 CLR 38

Walford v Miles [1992] 2 AC 128; [1992] 2 WLR 174; [1992] 1 All ER 453, HL(E)

Yam Seng Pte Ltd v International Trade Corpn Ltd [2013] EWHC 111 (QB); [2013] 1 All ER (Comm) 1321; [2013] 1 Lloyd’s Rep 526

APPEAL from the Court of Appeal

By a claim form dated 31 December 2014 the claimants, Times Travel (UK) Ltd and Nottingham Travel (UK) Ltd, commenced proceedings against the defendant, Pakistan International Airlines Corpn, claiming, inter alia, that they had entered into new agreements with the defendant as a result of illegitimate pressure and/or misrepresentation and that they were not bound by its terms and, therefore...

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