Times Travel (UK) Ltd v Pakistan International Airlines Corporation
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Moylan,Lady Justice Asplin |
| Judgment Date | 14 May 2019 |
| Neutral Citation | [2019] EWCA Civ 828 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2017/2065 |
| Date | 14 May 2019 |
[2019] EWCA Civ 828
Lord Justice David Richards
Lord Justice Moylan
and
Lady Justice Asplin
Case No: A3/2017/2065
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Warren
HC-2014-00247
Royal Courts of Justice
Strand, London, WC2A 2LL
Nigel Jones QC and Thomas Bell (instructed by City Solicitors Limited trading as Farani Javid Taylor Solicitors) for the Appellant
Philip Shepherd QC and Heather Murphy (instructed by Invictus Law LLP) for the Respondent
Hearing dates: 28–29 November 2018
Approved Judgment
Introduction
It is now well-established that a contract may be avoided on the grounds of economic duress, although its scope remains uncertain. This appeal concerns the area of perhaps the greatest uncertainty, that of lawful act duress, where a contract results from a threat of a lawful act or omission. Does lawful act duress exist at all and, if so, in what circumstances may it be invoked?
Following a six-day trial, in which a wide range of issues were investigated, Warren J held in a reserved judgment that the respondent Times Travel (UK) Limited (Times Travel) was entitled to avoid, on grounds of economic duress, a contract with the appellant Pakistan International Airline Corporation (PIAC). Under that contract, PIAC re-appointed Times Travel as an agent for the sale of flight tickets on terms that included a waiver by Times Travel of its claims for unpaid commission under prior arrangements. At the relevant time, PIAC was the only airline operating direct flights between the United Kingdom and Pakistan and the business of Times Travel was almost exclusively the sale of flight tickets to members of the Pakistani community in and around Birmingham for travel to and from Pakistan. Its business was therefore very largely dependent on the ability to sell PIAC tickets, for which it needed a contract with PIAC.
By 2012, a significant number of agents had commenced or were threatening proceedings to recover substantial sums said to be due by way of commission. In September 2012, PIAC gave notice of termination of existing agency contracts in accordance with their terms and offered new contracts but only on terms that the agents waived their existing claims. Not all agents succumbed to this pressure and continued their proceedings, while some other agents successfully bargained for a term in their new contracts that entitled them to receive from PIAC a sum equivalent to recoveries made in the litigation as if they had brought or continued proceedings. Other agents, including Times Travel, accepted the terms offered by PIAC. The judge held that, because of its dependence on PIAC for so much of its business, Times Travel had no practical alternative to accepting those terms if it wished to remain in business.
In 2014, Times Travel brought proceedings to recover the commission and other payments which it said were due under the earlier arrangements. One of PIAC's defences to the claim was the waiver given by Times Travel. This defence was defeated by the judge's acceptance of Times Travel's case that the contract containing the waiver had resulted from economic duress on the part of PIAC. Times Travel succeeded in most, but not all, of its claims.
The facts
The facts in a little more detail are as follows.
Times Travel is a small family-owned travel agency in Birmingham. Its directors are Asrar Ahmad and his son Ismail Ahmad. In 2008, it was approved by the International Air Transport Association (IATA) as a Passenger Sales Agent and as such was required to enter into an IATA standard form agreement with any airline by which it was authorised to sell tickets. In the same year, it was appointed an agent for PIAC. As the judge found, PIAC was an important trading partner for any travel agent selling airline tickets to the Pakistani community in the UK. As the judge found, Times Travel would be forced out of business if it could not sell PIAC tickets.
The contractual arrangements in force between the parties from 2008 to their termination in 2012 were not straightforward, as the judge explained at [9]–[17] of his judgment. At the start, Times Travel was entitled to commission at a rate of 9% on the price of tickets sold (9% Basic Commission) and to overriding commission (ORC) as an incentive relating to total sales.
Under the terms of these arrangements, each party was entitled at any time to give notice of termination, to take effect at the date specified in the notice which was not to be earlier than the end of the month following the month in which notice was given.
Disputes arose at an early stage as to the 9% Basic Commission and ORC both with Times Travel and with PIAC-appointed agents generally. A trade association, called the Association of Pakistan Travel Agents (APTA), was formed to represent the interests of PIAC-appointed agents as regards these disputes. At about the end of 2008, Times Travel became aware of the formation of APTA and its efforts to negotiate a deal with PIAC about amendments to the 9% Basic Commission for the benefit of APTA agents. It was later told by PIAC that these negotiations had broken down and that PIAC was going to stop paying the 9% Basic Commission and replace it with remuneration on a net fare basis.
Times Travel regularly chased PIAC for payment of the OCR. It was told that PIAC would be introducing a new commission scheme but that outstanding OCR for 2009 would be sorted out.
In 2010, Times Travel became aware of APTA members asserting claims against PIAC and threatening legal proceedings. PIAC advised Times Travel not to get involved with APTA and not to bring proceedings, and that an amicable solution would be reached.
The first action against PIAC in respect of 9% Basic Commission and ORC was commenced in February 2011, by an APTA member.
On 14 September 2012, PIAC sent a notice of termination to Times Travel, as it did also to all other agents in the UK, terminating its appointment with effect from 31 October 2012. The notice also stated that PIAC offered terms of re-appointment as set out in an attached document. On 17 September 2012, PIAC reduced Times Travel's fortnightly allocation of tickets from 300 to 60. As the judge found, this reduction in ticket allocation had a major impact on Times Travel's business and, if continued for much longer, would have put it out of business. It is not suggested that PIAC was acting in breach of contract, or otherwise unlawfully, in reducing the ticket allocation.
At a meeting on 24 September 2012, Times Travel signed a new agreement with PIAC (the New Agreement). The meeting was attended by Asrar and Ismail Ahmad, and two employees of Times Travel, and by two representatives of PIAC. The New Agreement, already signed on behalf of PIAC, was provided to the representatives of Times Travel. Earlier in September 2012, Asrar Ahmad had been shown a draft of the agreement but his request to take a copy with him, in order to read it carefully, discuss it with his son and obtain legal advice, had been refused.
The New Agreement was expressed to replace with immediate effect the previous arrangements and to be “the sole, exclusive and entire agreement” between the parties. Following the meeting, Times Travel's ticket allocation was restored to its usual level.
Under the terms of the New Agreement, Times Travel became entitled to net sale remuneration (NSR), whereby it was offered tickets at a discount of 7% to the price at which PIAC sold the tickets to the public. It also became entitled to commission under the Agent Productivity Scheme (APS) whereby commission was payable after specific, tiered sales targets were met. Although the written terms provided that this would be available only for the period from 1 July 2012 to 31 December 2012, the judge held that it was orally agreed that it would run beyond the end of 2012 “and well into the future” which the judge held to be at least until 31 December 2013. The New Agreement was terminable by either party on 60 days' notice.
Critically for present purposes, under the New Agreement Times Travel released PIAC from all claims to commission or remuneration on any basis other than as set out in the New Agreement. In other words, it released PIAC from all such claims arising under the arrangements in force prior to the making of the New Agreement. It is this provision that Times Travel alleged, and the judge found, had been agreed as a result of economic duress on the part of PIAC. The release was expressed to be in consideration for the introduction of APS but the judge held that the terms of the New Agreement and the APS may have represented adequate reward for future services but they could not be seen as adequate compensation for the waiver of existing claims.
The judge found that at the meeting on 24 September 2012 the representatives of Times Travel were told that the New Agreement was to be signed by all agents and that failure to sign it would result in consequences that would be out of the hands of PIAC's managers. The judge found that this was reasonably understood to mean that Times Travel's agency would come to an end and so would be unable to sell PIAC tickets. It was also said that if Times Travel signed the New Agreement its allocated ticket stock would be restored.
The judge found that:
“The Ahmads felt under pressure to sign the New Agreement in the light of the fall in ticket sales since the reduction in the ticket allocation and did not want TT to be put out of business, an outcome which they saw as the inevitable consequence of the withdrawal of TTs agency. They did not want to sign but considered that they had no alternative...
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