Times Travel (UK) Ltd v Pakistan International Airlines Corp
Court of Appeal
Citations: [2019] EWCA Civ 828; [2020] Ch 98.
Facts
The claimant was a travel agency. Their main business was the sale of tickets to fly to and from Pakistan. It was heavily dependent on the defendant airline. The defendant was the only airline which provided direct flights to Pakistan. The defendant’s agents claimed that the defendant owed them various sums in commission, a claim the defendant disputed. In response, the defendant terminated the agency contracts and offered each agent a contract requiring them to waive any claims to unpaid commission.
The claimant was one of the defendant’s agents at the time. The claimant accepted the new terms. They later sought to have the new agreement set aside for economic duress. The defendant argued that they had not procured the contract by economic duress, because their actions were legitimate and lawful.
Issue(s)
- Did the defendant exert illegitimate pressure on the claimant?
Decision
The Court of Appeal held in the defendant’s favour. The defendant exercised only legitimate pressure. This was because the defendant believed in good faith that it was entitled to act the way it did.
This Case is Authority For…
The legitimacy of pressure depends on the nature of the threat and the nature of the demand. In cases where the pressure is lawful, the focus will be on the nature of the demand.
Where a person (A) uses lawful pressure to induce another (B) to enter a contract, the pressure will not be illegitimate if A believes in good faith that they are entitled to make the demand of B. It does not matter whether or not the belief is reasonable. If A does not bona fide believe they are entitled to make the demand, the pressure will be illegitimate.
The burden of proof is on the party seeking to set the contract aside to prove that A was acting in bad faith.
Other
Richards LJ disapproved of obiter comments made about lawful act duress in Al Nehayan v Kent [2018] 1 CLC 216. In that case, Leggatt LJ stated that a lawful threat is illegitimate if:
‘(a) the defendant has no reasonable grounds for making the demand and (b) the threat would not be considered by reasonable and honest people to be a proper means of reinforcing the demand.’
Richards LJ could not see how the use of lawful means in good faith could contradict even basic standards of good commercial behaviour. He also speculated that this test is unclear and would lead to considerable uncertainty.
