Duress - Lecture notes PDF

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Victimization 1: Duress Professor Annick Masselot Introduction  

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Illegitimate pressure exerted by one person to coerce another to contract on specific terms. Pressure can be against the person, party’s property, or their economic wellbeing. o Whatever the form, the aim of the duress will be to force the other party to do something they mightn’t have agreed to do otherwise. o Usually it’s for the benefit of the person who has done the pressure. Common law recognises that contracts concluded under pressure are voidable. Thus, there must be two elements: o The pressure must be illegitimate; and o It must coerce the other party to enter the contract. o Highlighted in Per Universe case (must show illegitimate pressure which has a coercive effect).

AG for England and Wales v R [2002] per Tipping J at [62]     

Illegitimacy of pressure may amount to duress even if there is a practical choice. However, if there is an absence of practical choice, this may suggest the person is illegitimate. Illegitimacy of pressure can sometimes arise from conduct which can be lawful, but is illegitimate pressure; it’s easier to show illegitimacy of pressure if contract itself is unlawful. Starting point: everyone recognises pressure regarding contracts; concluding contracts is all about pressure. In all duress cases, court must consider whether the pressure under which the plaintiff has acted is regarded as legitimate pressure or illegitimate pressure. Courts normally consider if there was some reasonable alternative open to the plaintiff.

Duress to the Person 

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Constitutes of: o Actual violence; o A present threat of violence; OR o Actual or threatened imprisonment. May also consist of: o Threats to prosecute; o Extortion and blackmail. Example: you tell an illegal immigrant they must work for you in return for little pay, otherwise you will out them as an over stayer. Reporting this isn’t legal, but regardless it is still an illegitimate pressure on someone to sign a contract. To constitute duress, threats must: o Be of death, bodily harm, or imprisonment; o Be calculated to cause fear; and o Actually cause that fear.

Duress to Goods  

When one part unlawfully seizes, detains, damages, or destroys another’s goods, or threatens to do so. However, the pressure exerted over the goods must be truly irresistible.

Economic Duress   

Threats affecting a party’s economic interests or wellbeing; Which are illegitimate; and Which induce the contract.

Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989]  K had a contract to supply W with baskets. They had a trading agreement with A for at least 6 months to deliver goods to W. A was doing a delivery for K, to deliver goods to W.  Once the contract was signed, A had realised they’d underestimated the price to carry the baskets. They asked for a variation of the price. K said no.  A sent a letter to K, saying that either K signed the contract or they’ll stop delivering the goods. The director of K signed the contract but, once the delivery had been done, they refused to pay.  Held by Tucker J: there was economic duress, thus the contract was voidable: o When K’s director signed the contract, he did so unwillingly. He had no bargaining power, could not consider the contract an arms-length negotiation of the contract, and had no free or equal say in it. o Distinction made between economic duress and economic pressure. Only economic duress can vitiate the contract, however sometimes it overlaps.  In summary, the agreement was signed unwillingly and the pressure was illegitimate – the contract was voidable.

Illegitimate Pressure   

Pressure exerted to get someone to enter a contract can be both legitimate and illegitimate, however only illegitimate pressure constituted duress. The person who is pressurizing someone must be doing so in bad faith (e.g. blackmailing). Pressure will be illegitimate if: o It consists of unlawful threats; or o It involves unconscionable conduct.

Universe Tankships Inc. v ITWF [1983]   

Threats for economic duress didn’t succeed because, at the time, the pressure there was no existing contractual relationship. This is different to a situation where there’s an existing contract and one party introduces a new agreement and threatens to enforce it. “Pressure is illegitimate if it amounts to a legal wrong, as where the threat is unlawful conduct, or if the threat itself is unlawful, as where it amounts to blackmail.”

The Atlantic Baron [1979] QB 

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D agreed to build a tanker for USD$30million, which was payable in 5 installments. Between installments, the dollar had de-valued. D demanded a compensatory increase in the price due to the decrease in value, threatening to stop working unless they got more money. P got legal advice and were told D had no claim/no basis for demanding more money. Regardless, they agree and paid 10% under the USD$30million. 8 months later, P wanted their money back and said they paid under duress. Held: a wrongful and highly coercive threat and did amount to duress. However, the claim failed because P had delayed their claim until 8 months later. Part of the doctrine requires that there is a prompt action for a claim.

CTN Cash and Carry v Gallagher Ltd [1994] 

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CTN ran a business to several warehouses, and G regularly supplied cigarettes to those warehouses. G was being paid credit. Once, he delivered the cigarettes to the wrong warehouse. Supplier requested payment, saying they’d withdraw the credit facility with the warehouse wasn’t going to pay. G thought they were entitles to the payment of the cigarettes – they were requiring payment for something they weren’t entitled to, but genuinely thought they were. 8 months later, CTN asked for re-payments, claiming they’d paid under duress. Claim failed as G genuinely thought CTN owed them money (this was the crucial point). If there’d been no belief, pressure would’ve been illegitimate, thus making this duress.

Atlas Express Ltd v Kafco Ltd [1989]  

Held: this was an unlawful and coercive threat that amounted to duress. However, in the next case…

Williams v Roffey Bros. and Nicholls (Contractors) Ltd [1991]   

Court recognised there might be some benefit in paying more to complete the contract. sometimes, duration in the terms of the contract won’t amount to duress. This could represent good consideration, as for duress you must have a threat. In Kafco, no one was happy, and there was no benefit.

Haines v Carter [2001]

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Court held that duress involves lawful and unlawful conduct.

Moyes & Groves Ltd v Radiation NZ Ltd [1982] 

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Contract to buy goods and to be delivered from India. The contract to buy the goods had been made but the goods didn’t arrive till 2 years later. Vendor said they were going to send the goods back to India because the cost of chasing those goods had increased. CA: seller had a good ground for believing the contract had been abandoned 2 years later. The new arrangement was sensible and there was no economic duress in this case. Cooke J: to use economic duress should not be found lightly.

McIntyre v Nemesis DBK Ltd [2010] 

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Concerned debt of the property. Trustee of family trust agreed to vary the contract after the manager for the property (H) wanted more money. The trust claimed duress. H threatened to break the contract. Court agreed the threat to break the contract was unlawful and illegitimate. However, they made a distinction between legitimate and illegitimate threats to break a contract. Here, it was held that, while H was a bully, he was forceful but his conduct wasn’t illegitimate. The relevant consideration was the illegitimacy of the pressure.

Crown Commercial Construction Ltd v Lee [2012] NZHC 

It’s not unlawful to tell immigration that someone is working unlawfully, but if it’s blackmail and threats which have been stated to the immigrant will do something, it is an illegitimate threat.

Coercion  

The pressure must be a factor in coercing the other party to contract. It must also be irresistible: o The person coerced ‘chose to submit to the demand rather than take an alternative course of action’ because a reasonable person wouldn’t be able to resist it. o Their will need not be overridden – it is merely ‘deflected not destroyed’.

Pao On v Lau Yin Long [1980] 

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Had there been a coercion of the will to vitiate the consent? o Did the victim protest? o Was there an alternative course open to the victim? o Did the victim get independent advice? o Did the victim expect to void the contract? Held: there was commercial pressure but not enough to amount to coercion – it wasn’t sufficiently coercive that they chose to avoid litigation. Lord Scarman: there should be ‘coercion of the will, which vitiates consent’.

Dimskal Shipping Co v ITWF [1991]  

Coercion is the exact pressure categorized as illegitimate and pressure which constituted the significant cause inducing the plaintiff to deliver the contract. The pressure must have been significant in reducing the plaintiff’s choice and inducing them into entering the contract.

AG for England and Wales v R [2002] (affirmed [2004]) 

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R, a veteran from the Gulf War, was told to sign a confidentiality agreement otherwise he would be demoted. He did, then returned to NZ and wrote a book about his experiences which he published. There was an injunction made against the publication. CA denied the injunction, but allowed an assessment of damage for breach of contract. PC: R claimed there had been duress when he signed the agreement, saying the threat of demotion pushed him into signing it. Also, claimed there’d been undue influence because the ministry had really pressurized him as he was in a position where he had access to sensitive information. Held: pressure from the ministry was made in good faith. Ministry was requiring the agreement to be made in the interest of the SES, and R wasn’t forced to sign it. There were alternative choices, even though those choices may not have been ideal. Tipping J: “Illegitimate pressure may amount to duress even if there’s a practical choice, but in the absence of practical choice may suggest the pressure is illegitimate.” Lecturer is critical of this finding that there was a practical choice – the choice was to lose his position and his job. This is one area where there is a bit of bias.

Pharmacy Care Systems Ltd v AG (2004) 

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PCS set up a high volume, low margin (cheap pharmacy) for government institutions, one of them being an original health authority. Discovered later it was recycling unused drugs. This resulted in an investigation and folding the payment of the pharmacy care. PCS agreed to enter a debt of settlement and to refund the company with $80,000. 3.5 years later, PCS claimed they’d entered the contract under duress and were threatened with fraud procession if it wasn’t accepted. Hammond J: considered 5 elements making up duress: the pressure must push the victim into accepting the terms of the contract.

McIntyre v Nemesis DBK Ltd [2010]  Project between N (developer) and family (M). N was frustrated because a 3-year commitment was turning into an 11-year commitment. Suggestions were made that N would walk out if they weren’t paid more.  It was claimed N was paid more, but M did so under the duress that he was going to leave.  Held: this didn’t amount to coercion, and didn’t cross the line between forceful and illegitimate pressure.

The Effect of Duress: Voidable Contract a) The effect of duress is to render an agreement voidable rather than void – the agreement is valid until it is void. b) The right to avoid can be lost by ratification or affirmation. c) Damages may be awarded in the tort of intimidation.

Affirmation   

The party might have already demanded a contract or have taken steps into implementing/agreeing to a contract. It can be lost if the party affirmed the contract. E.g. Haines v Carter [2001]

Pharmacy Care Systems Ltd v AG (2004) Hadn’t taken the second step to complain fast enough, so it was viewed as them being happy enough with the contract and being an affirmation....