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Ahdar, Rex --- "Lawful act duress after Times Travel" [2021] OtaLawRw 7; (2021) 17 Otago LR 169

Last Updated: 22 August 2023

Lawful Act Duress after Times Travel


Lawful Act Duress after Times Travel

Rex Ahdar*

1 Introduction

The circumstances where a contract may be set aside on the grounds of economic duress are now relatively settled. Economic duress in the contract setting “is the imposition of improper pressure by threats that coerce a party to enter a contract.”1 The test thus has two fundamental elements: first, there must be the exertion of illegitimate pressure on a victim and, second, the imposition of that pressure must have compelled the victim to enter the contract.2 It is the first element that is the focus of this article.

The cases where the common law defence has succeeded have invariably involved a threat of unlawful action – typically a threat to breach or refuse to perform an existing contract – by the defendant. By contrast, where the threat is one involving a lawful act (for example, the termination of a contract on grounds allowed under the contract or a reduction in the supply of goods in a way permitted by the agreement) the courts have been very hesitant to say illegitimate pressure is present.

The United Kingdom Supreme Court in Pakistan International Airline Corporation v Times Travel (UK) Ltd3 recently had the opportunity to examine lawful act duress. Lord Burrows explained why the issue is a thorny one:4

Lawful act duress is controversial. This is essentially because many contracts are entered into under some form of pressure exerted by the other party and, plainly, one would not wish to undermine all such contracts. An insistence that the threat must be one to do something unlawful draws a clear line with a standard that is easily understood and can easily be applied. But once one crosses that line to include threats of lawful acts, it is not easy to distinguish between threats that will count as duress and threats that will not... The fear of wide-ranging disruption and uncertainty, particularly for commercial parties, has led

* Professor, Faculty of Law, University of Otago. I am most grateful to Simon Connell for his helpful comments on an earlier draft of this article. Any errors are mine.

  1. McIntyre v Nemesis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 (CA) at [19].
  2. At [20], citing Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (HL) at 400, [1982] 2 All ER 67.
  3. Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40, [2021] All ER (D) 40 (Aug).

4 At [82]–[83].


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some distinguished commentators to argue that lawful act duress should

not exist.

To date it has been difficult to find examples of lawful act duress: “actual instances are tantalisingly elusive”.5 Yet, rather than categorically deny the possibility of a claim of lawful act duress ever succeeding, the courts have left the possibility open of such a threat constituting illegitimate pressure, albeit noting that it would be a rare or exceptional case where this would be found.6

It is perhaps worth pausing to observe the very oddity of the language that is used here. One is asking whether a threat of a lawful act is nonetheless illegitimate. In ordinary language that which is lawful is legitimate. We know we are searching for some subtle or hidden nuance when we ask whether that which is lawful is nonetheless illegitimate.

In Times Travel the Supreme Court were adamant that the concept of lawful act duress did exist in English law.7 But the Court was divided on the precise test or circumstances in which it ought to be found.

In this short article I shall analyse the Supreme Court’s decision. If the Court hoped it would clarify the issue and provide much needed certainty to the doctrine, its reasoning does not quite, in my view, achieve that goal. Lingering questions remain and it will take further litigation before the scope of the doctrine of lawful act duress can be confidently stated, if indeed it can ever be so stated. The Court did, after all, caution at the outset that “the boundaries of lawful act duress are not fixed”8 and this article seeks to examine in which respects the doctrine remains a work in progress.

  1. Dold v Murphy [2020] NZCA 313 at [69]. The Court added (at [69]): “Those that appear to be lawful act duress cases, turn out, on closer inspection, to be explicable on the basis of an unlawful act. To date, the concept of lawful act duress appears to reside more in dicta than in practice.”
  2. The most well-known instance of this being Lord Steyn LJ’s admonition to deliberately refrain from saying “never” to the success of a lawful act duress claim in CTN Cash and Carry Ltd v Gallaher Ltd [1993] EWCA Civ 19; [1994] 4 All ER 714 at 719.
  3. An unfortunate vindication for those who preferred to see the end of the beleaguered doctrine of lawful act duress. See, for example, Paul Davies and William Day, “‘Lawful Act’ Duress (Again)” (2020) 136 LQR 7; Graham Virgo, The Principles of the Law of Restitution (3rd ed, Oxford University Press, Oxford, 2015) at 215 (these two writings are cited by Lord Burrows in Times Travel (UKSC) at [83]–[84]) and my own opposition: Rex Ahdar, “Contract doctrine, predictability and the nebulous exception” (2014) 73 Camb LJ 39 at 44–47.
  4. Times Travel (UKSC), above n 3, at [3] per Lord Hodge.

Lawful Act Duress after Times Travel 171

2 The Times Travel case

The facts of Times Travel9 concern the action of a monopoly supplier which used its considerable bargaining power to force a small business into a new contract, the new agreement being, unsurprisingly, again very much to the dominant firm’s advantage.

Times Travel (TT) was a small family-owned travel agency in Birmingham whose business was almost exclusively devoted to the sale of flight tickets to and from Pakistan. At the relevant time, Pakistan International Airline Corporation (PIAC) was the only airline operating direct flights between the United Kingdom and Pakistan. TT’s business was critically dependent upon its ability to sell PIAC tickets and indeed (as the trial judge found), TT would be forced out of business if it could not sell PIAC tickets.

TT entered into a contract with PIAC in 2008. TT was entitled to a basic commission at a rate of 9% on the price of tickets sold and also an overriding commission (ORC). Each party was entitled to terminate the agreement by giving one month’s notice.

Disputes arose at an early stage between TT and other PIAC-appointed agents over the 9% basic commission and ORC. It was alleged by the travel agents that the requisite commissions were not being paid by the airline. An association of Pakistan travel agents was formed in an effort for the agents to collectively push their claims. PIAC reacted by announcing it was going to stop paying the 9% basic commission and to replace it with remuneration on a net fare basis. One of the disgruntled Pakistan travel agents commenced legal proceedings again PIAC in February 2011. TT did not join in these proceedings having been advised by PIAC that an amicable solution was the better pathway ahead.

By late 2012 matters came to a head and on 14 September 2012, PIAC sent a notice of termination to TT, as well as to all its other agents, terminating its appointment with effect from 31 October 2012. The notice also attached a new contract for the agents to sign if they wanted to continue selling the airline’s tickets. On 17 September, PIAC drastically reduced TT’s fortnightly allocation of tickets from 300 to 60. This reduction in tickets would, as the trial judge found, have resulted in TT’s going out of business if it had continued for much longer. On 24 September, TT signed a new agreement with PIAC. Following the signing of the agreement, which was to take effect immediately, TT’s ticket allocation was restored to its usual level.

  1. This account of the facts is drawn from David Richard LJ’s judgment in the Court of Appeal: Times Travel (UK) Ltd v Pakistan International Airlines Cooperation [2019] EWCA Civ 828 at [2]–[27].


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Significantly, the new agreement contained an onerous waiver term that released PIAC from all claims or remuneration on any basis other than that set out in the new contract. In other words, it released PIAC from all the claims arising under the previous agreement. TT subsequently brought a claim against PIAC on 31 December 2014 alleging that it was entitled to rescind the new agreement because TT had entered into it under duress. It claimed it was still entitled to commission payments under three heads. The most important of these claims for unpaid commission was that for unpaid 9% basic commission on ticket sales from October 2010 to the date of the termination of the former contract in October 2012. This was by far the largest of the three claims and amounted to £1.25m plus interest of around £380,000.10

Following a six-day trial, Warren J held that TT was entitled to avoid the new agreement on the grounds of economic duress, even though PIAC’s actions had been entirely lawful: 11

So far as TT is concerned, I consider that it has established its claim based on economic duress... I consider that the elements required to be established are made out. This is one of those cases where, although acting lawfully, the defendant, PIAC, has placed illegitimate pressure on TT. Further, that pressure was a significant cause of TT entering into the contractual arrangements which it did...

TT was thus entitled to succeed on, inter alia, the principal claim for the unpaid 9% basic commission. The trial judge made the crucial finding of fact that PIAC genuinely believed that the 9% basic commission had ceased to be payable and had been replaced by a different formula (net sales remuneration) in October 2010.

The Court of Appeal allowed PIAC’s appeal. It held that where the relevant threat was of lawful action, economic duress could only be established if PIAC’s demand had been had been made in bad faith in the sense that the airline must not have genuinely believed it had a defence to TT’s claims for commission. As Warren J had found that PIAC had not been acting in bad faith the defence was not made out. The Court of Appeal rejected the argument that it is sufficient for lawful act duress that the stronger party’s belief in its claim was “unreasonable”.12 The reasonableness of the defendant’s belief was too uncertain a basis to judge the validity of that belief. Rather, the fulcrum upon which the defence turned was a good faith demand: “In judging the use of lawful

  1. Albeit TT had to give credit for some £435,000 received for tickets sales in that period.
  2. Times Travel (UK) Ltd And Another v Pakistan International Airlines Corporation [2017] EWHC 1367 (Ch) [2017] All ER (D) 14 (Jul), at [262].

12 See at [105]–[107].

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acts or threats of lawful acts as commercial pressure, there is a sharp distinction between such use to pursue demands made in good faith and those made in bad faith”.13

The Supreme Court unanimously dismissed the appeal by TT.14 Lord Hodge delivered the lead judgment with which Lord Reed, Lord Lloyd-Jones and Lord Kitchen agreed. In an even longer opinion, Lord Burrows delivered a concurring judgment. There was a considerable number of matters of mutual agreement, however on the key question of the precise basis for establishing a successful defence of law act duress, the two judgments differed. Lord Burrow’s judgment largely carries on with the analysis of the lead judgment of David Richards LJ in the Court of Appeal, with the litmus test centring upon the presence of a demand made in bad faith. The lead judgment, by contrast, expressly rejected the bad faith test as suitable and Lord Hodge preferred to limit the availability of the defence to two recognised categories as illustrated from the small handful of cases to date where the lawful act duress had been made out. The two recognised instances of lawful act duress were situations where the defendant had acted in a morally reprehensible way such that its conduct amounted to illegitimate pressure.

3 General acceptance of commercial self-interest and hard bargaining

Both Lord Hodge and Lord Burrows were agreed upon many matters.15 They agreed that this was not the occasion to recognise “a general principle of good faith dealing”.16 As Lord Burrows put it:17

... that would require a court to try to apply a standard of what is commercially unacceptable or unreasonable behaviour. That would be a radical move forward for the English law of contract and the uncertainty caused by it seems unlikely to be a price worth paying.

Against this background, the court confidently state that, in general, a reliance upon one’s commercial self-interest is justified when a party undertakes bargaining or negotiation. Lord Burrows explained:18

13 At [106].

  1. Times Travel (UKSC), above n 3.
  2. See at [1] where Lord Hodge listed seven important matters of agreement besides the overall agreement to dismiss the appeal.

16 At [1], [26]–[27], [95].

17 At [95].

  1. At [97]. The “rough and tumble” dictum of Dyson J has also been endorsed by the New Zealand Court of Appeal: Dold v Murphy, above n 5, at [72].


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If that were not the case, normal commercial bargaining would be seriously disrupted. For example, in the course of negotiations for a contract, lawful act threats may sometimes be used by one party (A) as a means of extracting from the other party (B) what A is demanding from

B. As Dyson J observed in DSND Subsea Ltd... [2000] EWHC 185; [2000] BLR 530, para 131... “Illegitimate pressure must be distinguished from the rough and tumble of normal commercial bargaining.”

The “rough and tumble” of commercial bargaining means that one party may legitimately take advantage of any superior bargaining power it might possess and so attempt to impose harsh or onerous terms on a weaker party. Lord Hodge observed:19

... there is no doctrine of inequality of bargaining power and no general principle of good faith in contracting in English law. A commercial party in negotiation with another commercial party is entitled to use its bargaining power to obtain by negotiation contractual rights which it does not have until the contract is agreed. A powerful commercial party, such as a monopoly supplier or monopoly purchaser, can impose onerous terms, for example demanding a premium, as a condition for entering into a transaction with another party.

The English common law had long rejected a doctrine of inequality of bargaining power20 and, in similar fashion, considered that control over the undue exercise of monopoly power was best left to parliament to address through, for example, competition law.21

The hard bargaining that the law countenances is very much set within the pre-contract stage, that is, during negotiations leading up to the entry into the contract. Numerous passages make this clear. So it is “in negotiating a commercial contract”,22 “as a condition for entering into a transaction with another party”,23 “as a condition for entering into contractual relations”,24 “as a pre-condition for entering into contractual relations”,25 and “when a party (A) [is] negotiating a contract with another party (B)”26 that tough, even “exorbitant”27 demands may be legitimately made. A party may make a demand for a sum of money as a precondition for entering into a contract and “[p]lainly economic duress could not be made out (there would otherwise be a risk of undermining

19 At [44].

20 At [3], [26].

21 At [42].

22 At [26].

23 At [44].

24 At [49].

25 At [54].

26 At [125].

27 At [49].

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ordinary contractual negotiations) even if it could be shown that A did

not genuinely believe itself entitled to the money demanded from B”.28

There is thus considerable latitude allowed parties in negotiations for entry into the contract to advance very tough demands. But it seems clear, in my view, that where the parties are in an existing relationship the scope for tough demands may be seen in a different light.

4 What marks out the exceptional case?

If, as a “general proposition”, a demand made in one’s commercial self- interest is justified, then the doctrine of lawful act duress must necessarily be concerned with “identifying rare exceptional cases where a demand motivated by commercial self-interest is nevertheless unjustified.”29

The Supreme Court agree that in delineating the scope of the doctrine the focus ought to be on the nature of the demand made rather than the nature of the threat. The distinction between the demand and the threat derives from Lord Scarman’s judgment in Universe Tankships.30 His Lordship explained that in assessing the legitimacy of the pressure (or threat) exerted, one may first, have to consider the nature of the pressure (or threat), which will in many cases be decisive, and secondly, consider the nature of the demand which the pressure is applied to support.31 In determining what is illegitimate pressure, the usual focus is on the lawfulness of the threat. If the threat is unlawful then, there is no need to examine the demand. As Lord Scarman observed: “the law regards the threat of unlawful action as illegitimate, whatever the demand.”32 Where the threat is of a lawful act the basis for evaluating its legitimacy forces one to look elsewhere, namely, to the demand which the threat is applied to support.

Back to Times Travel, the Supreme Court repeatedly insist that it will be a “rare” or “exceptional” or “extremely limited” case33 where a self- interested demand can nevertheless be characterised as unjustified. Furthermore, because of the danger of creating uncertainty its scope must be delineated with as much clarity as one can muster. As Lord Burrows stated:34

28 At [125].

29 At [99].

  1. Universe Tankships (CA), above n 2.
  2. At [401]. Richards LJ quotes this passage in Times Travel (CA), above n 10, at [50].
  3. Universe Tankships (CA), above n 2, at 400.

33 See Times Travel (UKSC), above n 3, at [1], [28], [30] [57], [59], [99], [136].

  1. Times Travel (UKSC), above n 3, at [93]. Lord Hodge, at [1], agreed with this statement.


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Within the realm of commercial contracts, with which we are here concerned, English law has a long-standing reputation for certainty and clarity and there is a significant danger that that resputation will be lost if the law on lawful act economic duress is stated too widely or with insufficient precision.

5 The scope of lawful act duress according to the lead judgment

Lord Hodge’s exposition of the boundaries of lawful act duress flow from his initial examination of the very few instances where the concept had been recognised. The small handful of cases, just five, where lawful act duress had been found provided both the evidence for the existence of the doctrine in the English common law and set the boundary of lawful act duress for now. The cases fall into two categories:35

The first circumstance is where a defendant uses his knowledge of criminal activity by the claimant or a member of the claimant’s close family to obtain a personal benefit from the claimant by the express or implicit threat to report the crime or initiate a prosecution. The second circumstance is where the defendant, having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and thereby forces the claimant to waive his claim. In both categories of case the defendant has behaved in a highly reprehensible way which the courts have treated as amounting to illegitimate pressure.

The first category, “exploitation of knowledge of criminal activity”,36 is based upon three cases37 that although not originally seen as examples of lawful act duress, can now be rightly so classified. These cases were originally decided under equity’s undue influence principles,38 but now that economic duress had become securely established under the common law in the latter half of the twentieth century it was sensible to treat them as economic duress decisions.39

The second category is “using illegitimate means to manoeuvre the claimant into a position of weakness to force him to waive his claim”.40 This category is drawn from two cases, Borelli v Ting41 and Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cent K).42 The claimants in both

35 At [4].

  1. This is Lord Hodge’s shorthand description, see subheading (1).
  2. Williams v Bayley [1866] UKLawRpHL 11; (1866) LR 1 HL 200; Kaufman v Gerson [1904] UKLawRpKQB 40; [1904] 1 KB 591;

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

  1. Times Travel (UKSC), above n 3. at [8], [89]–[90]. 39 At [9], [90].
  2. Lord Hodge’s description, see subheading (2).
  3. Borelli v Ting [2010] UKPC 21, [2010] Bus LR 1718.
  4. Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cent K) [2012] EWHC 273 (Comm), [2012] 2 All ER (Comm) 855.

Lawful Act Duress after Times Travel 177

these cases were left with no practical alternative but to waive their claims because of the unconscionable conduct by the threatening party. In both cases the threatening party employed lawful threats but also used “reprehensible means”43 to manoeuvre the claimant into a vulnerable position where it had no alternative but to waive its pre-existing rights and this, in the circumstances, amounted to illegitimate pressure. Lord Hodge explains that the reprehensible means included “dishonest behaviour” and “misleading activity” by the threatening party in Borelli and the Cent K respectively.44

Lord Hodge expounds at some length the prominent role of equity in the development of the common law of duress45 and how “[t]he ideas of an improper motive for action or illegitimate pressure are closely aligned with the equitable concept of unconscionability”.46 The close affinity of the two was emphasised at the outset of Lord Hodge’s judgment:47

... the courts have developed the common law doctrine of duress to include lawful act economic duress by drawing on the rules of equity in relation to undue influence and treating as “illegitimate” conduct which, when the law of duress was less developed, had been identified by equity as giving rise to an agreement which it was unconscionable for the party who had conducted himself or herself in that way to seek to enforce. In other words, morally reprehensible behaviour which in equity was judged to render the enforcement of a contract unconscionable in the context of undue influence has been treated by English common law as illegitimate pressure in the context of duress.

The requirement that the lawful conduct be “reprehensible” functions in the same foundational fashion that “unconscionable” does in the equitable doctrines aimed at redressing exploitation. Reprehensible conduct is at the core of the doctrine of lawful act duress and it is repeated throughout Lord Hodge’s judgment.48

Does the doctrine of lawful act duress extend beyond the two categories denoted? We cannot be entirely sure. Lord Hodge did not favour Lord Burrow’s formulation of the doctrine (which I shall discuss next) as it would extend it “beyond the position in the five cases I have discussed in which such a claim succeeded.”49 This indicates a readiness to limit the doctrine to the two categories identified, at least for the time being. Given that he had warned that although “the boundaries of lawful act

  1. Times Travel (UKSC), above n 3. at [17]. 44 At [18].

45 At [19].

46 At [20].

47 At [2].

48 See at [2], [4], [17], [56]–[59].

49 At [46].


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duress are not fixed and the courts should approach any extension with caution, particularly in the context of contractual negotiations between commercial entities”50 it might be that the doctrine is confined to the two categories denoted, and no further. Logically, the second category might extend to claims for sums due and not just the waiver of claims due,51 but beyond that it is difficult to know what it might cover. What we can say is that any extension must involve conduct that can be properly characterised as “reprehensible”.

6 The scope of lawful act duress according to Lord Burrows

The key criterion for Lord Burrows is “bad faith”. In his conclusion he


In relation to a demand for a waiver by the threatened party of a claim against the threatening party, a demand is unjustified, so that the lawful act economic threat is illegitimate, where, first, the threatening party has deliberately created, or increased, the threatened party’s vulnerability to the demand and, secondly, the “bad faith demand” requirement is satisfied. The demand is made in bad faith where the threatening party does not genuinely believe that it has any defence (and there is no defence) to the claim being waived.

Lord Burrows believed that the “bad faith demand” requirement “provide[d] the appropriate certainty that is essential for the recognition of lawful act economic duress”53 and provided “a limited but clear and workable boundary for what constitutes an unjustified demand—so that a lawful act economic threat is illegitimate”.54 The demand is made in bad faith “in the particular sense that the threatening party does not genuinely believe that it is owed what it is claiming to be owed or does not genuinely believe that it has a defence to the claim being waived by the threatened party.”55 The leading decision of CTN Cash and Carry Ltd v Gallaher Ltd had noted that a “critically important characteristic”56 why the lawful act demand did not amount to illegitimate pressure in that case was the finding that the demand was made in good faith: the defendants genuinely, albeit mistakenly, believed they were contractually entitled to the payment demanded. Similarly, in the instant case, had TT proved the

50 At [3].

51 Lord Burrows at [130] couched his test to include “a demand for what is

claimed to be owing or for a waiver of a claim...”.

52 At [136].

53 At [130].

54 At [135].

55 At [102].

56 [1993] EWCA Civ 19; [1994] 4 All ER 714 at 718.

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PIAC was in bad faith in making the demand for the waiver, its claim for rescission would , in Lord Burrows’ opinion, have succeeded.57 But Lord Hodge was adamant that even if PIAC had been shown to have made a bad faith demand it would not have succeeded.58 This implies that a bad faith demand is not sufficiently egregious to amount to reprehensible conduct as that threshold is understood by Lord Hodge.59

Is the bad faith demand requirement too subjective in that “the relevant standard depends on the threatening party’s own subjective perception of what the law is”?60 Lord Burrows rejected the concern that the bad faith criterion was too subjective on the basis that it was consistent with the law on compromises where one similarly looks at whether a party bona fide believes it has a claim.61

Lord Hodge thought the bad faith demand requirement would be of rather “limited utility”62 for those wishing to assert the defence of lawful act duress. It is clear that the burden of proof in relation to the bad faith demand requirement rests upon the threatened party who is seeking to have the contract set aside for duress.63 It would have “to prove that the threatening party was acting in bad faith in the sense that it did not genuinely believe that the money was owing or that there was a defence to the claim being waived”.64

This would not mean that a threatening party could simply assert that it genuinely believed in its demand.65 Where, for example, the defendant’s belief was “manifestly unreasonable”, the evidential onus might switch to the defendant.66 But, by and large, the task of demonstrating the defendant’s “subjective bad faith”67 is a demanding one, and one not likely to be satisfied very often.

The fact that the bad faith demand requirement would seldom to be demonstrated is, however, not a bad thing for, after all, lawful act duress

57 Times Travel (UKSC), above n 3, at [115]. 58 At [3].

59 However, see further at [56] where Lord Hodge appeared at one point to equate bad faith behaviour with reprehensible conduct (“In both Borelli and The Cent K the conduct of A by which A applied pressure to B involved bad faith or behaviour that was similarly reprehensible.”). Lord Burrows, at [133], was puzzled as to how Lord Hodge saw the relationship between “bad faith” and reprehensibility.

60 At [116].

61 At [116] and [132].

62 At [51].

63 At [117].

64 At [117].

65 At [118].

66 At [118].

67 At [51].


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is meant to be a rare and exceptional thing. So, in my view, a difficult and stringent requirement for lawful act duress is entirely in keeping with its rare nature.

The bad faith demand requirement does not apply to the pre-contract bargaining stage. Otherwise there might be allegations of bad faith made against parties making speculative and harsh demands in the normal rough and tumble of negotiations. It does not, explained Lord Burrows, make sense to say a party is making a demand which it does not genuinely believe it is entitled to make in the pre-contract stage since no entitlements exist yet:68

Indeed, it is obvious that, until the contract has been concluded, A has no contractual entitlement to what is demanded [from B]. Put another way, the “bad faith demand” requirement is dependent on there being an existing legal right and duty between the parties (whether contractual or otherwise) which provides a clear and certain standard against which alleged bad faith of the threatening party can be assessed. Without that tie to an existing legal right and duty, the “bad faith demand” requirement loses its force as being underpinned by a workable standard of dishonesty: the bad faith demand is concerned with either a dishonest assertion of an existing right or the dishonest removal (by waiver) of an existing right.

So lawful act duress is confined to bad faith demands made against the background of an existing legal (and, most often, contractual) relationship.69

7 Satisfying the test for lawful act duress

If we take Lord Hodge’s judgment (supported as it was by three other members of the Court) as containing the more authoritative exposition of the law on when lawful act duress is to be found, is it a straightforward test to apply? The facts of Times Travel itself suggest otherwise.

For demands to the waiver of a claim, recall that Lord Hodge requires the deliberate manoeuvring of the threatened party into a position of vulnerability by illegitimate means. Here we require that the defendant’s conduct be properly labelled as reprehensible.

Lord Hodge could find no such reprehensible conduct present in Times Travel. By contrast, Lord Burrows considered that the sudden and deliberate cutting by PIAC of its ticket allocation to TT (from 300 to 60 tickets) on 17 September 2012, three days after it proffered the new contract for signing, was deliberate manoeuvring by the airline to increase TT’s vulnerability to PIAC’s demand (set out in the new agreement)

68 At [125].

69 See at [135].

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for a waiver of accrued claims. For Lord Burrows this was, “on the face of it”,70 the very sort of behaviour described in Lord Hodge’s second category of recognised lawful act duress (using illegitimate means to manoeuvre the claimant into a position of weakness). The fact that the claimant was already in a weak position (because of PIAC’s monopoly) did not mean that TT’s position could not be worsened still further by particular untoward actions of the airline. If one was to find that there was no lawful act duress in this case, as the lead judgment concluded, then it was critical to have an additional requirement such as the “bad faith demand” one.71 For Lord Hodge, the reduction in ticket allocation was not the kind of manoeuvring by illegitimate means that fell with the scope of lawful act duress. He observed:72

I respectfully disagree [with Lord Burrows] and take a narrower view of the scope of lawful act economic duress in this context. The reduction of the ticket allocation was a hard-nosed exercise of monopoly power, which, in the absence of a doctrine of unequal bargaining power, could not by itself amount to illegitimate pressure. Something more was needed, such as the reprehensible characteristics of the behaviour in Borrelli and The Cenk K...

The sudden cut in ticket allocation was simply an example of the exercise of “hard-nosed monopoly power”.73 “Something more” was needed to lift the impugned conduct to the level of reprehensible conduct. However, for Lord Burrows, the fact that PIAC was able to suddenly reduce the ticket allocation, increasing TT’s particular vulnerability, which PIAC was then able to exploit by making the demand for the waiver, constituted conduct that took it “outside the realm of the mere use of monopoly power”.74 This was the “something more” that Lord Hodge alluded to.

70 At [132].

71 At [113].

72 At [57].

  1. The hard-nosed exercise of monopoly power might nonetheless contravene competition law. Interestingly, for present purposes, a distinction between anticompetitive conduct and reprehensible conduct has been drawn. The High Court of Australia in the leading case, Queensland Wire Industries Pty Ltd v Broken Hill Pty Ltd [1989] HCA 6; (1989) 83 ALR 577, held that conduct in violation of competition law in Australia and New Zealand does not require that the defendant monopolist’s activity (such as a refusal to supply) be “reprehensible”.
  2. At [113]. The other feature of the case which, according to Lord Burrows, took it outside of the use of monopoly power was PIAC’s breach of contract by not paying a very large sum of past commission owing to TT, see also at [113].


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What was seen, by Lord Hodge, as acceptable conduct by a monopolist in support of a demand, was, for Lord Burrows, behaviour that went beyond the pale. For the latter, the airline’s conduct transgressed the line into reprehensible behaviour and fell into the category of illegitimate means to press home a party’s demand. One can understand Lord Burrows’ frustration when he observed he was “very concerned” with the approach advocated by Lord Hodge:75

With great respect, I am also very concerned that, without any focus on the “bad faith demand” requirement, defined in the specific sense that I have set out, and with instead the essential guide being that the defendant’s conduct must be “reprehensible” or “unconscionable” or using “illegitimate means” (which is, by definition, distinct from unlawful means), one will be permitting lawful act economic duress to create considerable uncertainty in the realm of commercial contracts.

If we return to CTN Cash and Carry and Steyn LJ’s careful judgment, we will recall how the Court of Appeal was loath to have a test for lawful act duress that depended upon judges’ evaluation of when pressures were improper according to prevailing notions of commercial and social morality. As Steyn LJ cautioned:76 “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”.

Is it possible that in laying down a test of “reprehensible” conduct, the Supreme Court, as least as the lead judgment expounds it, has failed to navigate its way past a guide to illegitimate pressure that is any less encumbered with uncertainty than what is morally or socially unacceptable?

8 Conclusion

The UK Supreme Court in Times Travel had the opportunity to definitively clarify the existence and the scope of lawful act duress.

We know with certainty that lawful act duress does exist in English law. We also know that it exists in New Zealand law. The Court of Appeal in Dold v Murphy77 accepted its existence but found it had not been made out on the facts.

As for when and under what circumstances it will be found, the answer is rather murkier. We do know it will rarely be found, but then we always knew that. It is now more clear than ever that robust bargaining

75 At [133].

  1. CTN Cash, above, n 7, at 719.
  2. Above n 6. Dold v Murphy is discussed by Lord Hodge in Times Travel, at [34].

Lawful Act Duress after Times Travel 183

is permitted prior to the entry into a contract. Dold v Murphy noted it was “most unlikely” a threat not to enter a contract would ever constitute an illegitimate threat.78 Parties can exploit their superior bargaining power and monopoly power in this pre-contract phase. Thereafter, lawful act duress if it is to be found, it will be against the background of existing rights and only in exceptional circumstances and here there are two versions.

First, according to the lead judgment of Lord Hodge, lawful act duress will be found in two carefully defined situations. One is where the defendant exploits knowledge of the other party’s criminal activity. The other is where the defendant uses illegitimate means to manoeuvre the other party into a position of weakness to force that party to waive its claim or accede to a demand for what is claimed to be owing. Both these categories require the defendant to have acted in a highly reprehensible manner. If there are any other situations where lawful act duress will in the future be found they must be marked by this reprehensible conduct.

The second answer, according to Lord Burrows, is that lawful act duress is anchored in the need for a “bad faith demand” not some broader notion of reprehensible conduct. The defendant must be proved to have lacked a genuine belief in its entitlement to the claim or the waiver of the claim. The defendant must also have deliberately created or increased the threatened party’s vulnerability to the demand.

If the lead judgment becomes the authoritative one, its reliance upon the notion of reprehensible conduct will not be satisfying to those who longed for a more certain test. It may be that Lord Burrow’s bad faith demand test provides greater certainty and it can at least be said to maintain the status of lawful act duress being a rare creature. The claimant will find it very difficult to prove the threatening party lacks subjective good faith.

In Times Travel we read these words (made with reference to CTN Cash and Carry):79 “This judgment, although an important steppingstone in the development of the doctrine of lawful act duress and cited in later cases, is authority for what is not such duress and not for what is.” It would be ironic if this assessment were to be considered as no less applicable to Times Travel.

  1. Dold v Murphy, at [76].
  2. At [43] (underlining in original).

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