Universe Tankships Inc of Monrovia v International Transport Workers Federation

 

[1982] 2 WLR 803

House of Lords

 

ITF blacked a ship belonging to Universe Tankships as part of its policy to improve the wages and conditions of crews on ships flying flags of convenience. As a result of the blacking Universe Tankships agreed to pay $6,480 to ITF's welfare fund. After the ship had sailed Universe Tankships brought an action claiming the return of the $6,480 on the basis that they had paid it under duress.

 

Lord Diplock

 

My Lords, I turn to the second ground on which repayment of the $6,480 is claimed, which I will call the duress point. It is not disputed that the circumstances in which ITF demanded that the shipowners should enter into the special agreement and the typescript agreement and should pay the moneys of which the latter documents acknowledge receipt, amounted to economic duress upon the shipowners; that is to say, it is conceded that the financial consequences to the shipowners of the Universe Sentinel continuing to be rendered off-hire under her time charter to Texaco, while the blacking continued, were so catastrophic as to amount to a coercion of the shipowners' will which vitiated their consent to those agreements and to the payments made by them to ITF This concession makes it unnecessary for your Lordships to use the instant appeal as the occasion for a general consideration of the developing law of economic duress as a ground for treating contracts as voidable and obtaining restitution of money paid under economic duress as money had and received to the plaintiffs' use. That economic duress may constitute a ground for such redress was recognised, albeit obiter, by the Privy Council in Pao On v Lau Yiu Long. The Board in that case referred with approval to two judgements at first instance in the commercial court which recognised that commercial pressure may constitute duress: one by Kerr J in Occidental Worldwide Investment Corporation v Skibs A/S Avanti, the other by Mocatta J in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, which traces the development of this branch of the law from its origin in the 18th and early 19th century cases.

 

It is, however, in my view crucial to the decision of the instant appeal to identify the rationale of this development of the common law. It is not that the party seeking to avoid the contract which he has entered into with another party, or to recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded. The rationale is that his apparent consent was induced by pressure exercised upon him by that other party which the law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind. It is a rationale similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted under colour of office, or under undue influence or in consequence of threats of physical duress.

 

Commercial pressure, in some degree, exists wherever one party to a commercial transaction is in a stronger bargaining position than the other party. It is not, however, in my view, necessary, nor would it be appropriate in the instant appeal, to enter into the general question of the kinds of circumstances, if any, in which commercial pressure, even though it amounts to a coercion of the will of a party in the weaker bargaining position, may be treated as legitimate and, accordingly, as not giving rise to any legal right of redress. In the instant appeal the economic duress complained of was exercised in the field of industrial relations to which very special considerations apply.

 

Lord Scarman (dissenting)

 

It is, I think, already established law that economic pressure can in law amount to duress; and that duress, if proved, not only renders voidable a transaction into which a person has entered under its compulsion but is actionable as a tort, if it causes damage or loss: Barton v Armstrong and Pao On v Lao Yiu Long. The authorities upon which these two cases were based reveal two elements in the wrong of duress: (1) pressure amounting to compulsion of the will of the victim; and (2) the illegitimacy of the pressure exerted. There must be pressure, the practical effect of which is compulsion or the absence of choice. Compulsion is variously described in the authorities as coercion or the vitiation of consent. The classic case of duress is, however, not the lack of will to [resist] but the victim's intentional submission arising from the realisation that there is no other practical choice open to him. This is the thread of principle which links the early law of duress (threat to life or limb) with later developments when the law came also to recognise as duress first the threat to property and now the threat to a man's business or trade. The development is well traced in Goff and Jones, The Law of Restitution, 2nd edn.

 

The absence of choice can be proved in various ways, eg by protest, by the absence of independent advice, or by a declaration of intention to go to law to recover the money paid or the property transferred: see Maskell v Horner. But none of these evidential matters goes to the essence of duress. The victim's silence will not assist the bully, if the lack of any practicable choice but to submit is proved. The present case is an excellent illustration. There was no protest at the time, but only a determination to do whatever was needed as rapidly as possible to release the ship. Yet nobody challenges the judge's finding that the owner acted under compulsion. He put it thus:

 

"It was a matter of the most urgent commercial necessity that the plaintiffs should regain the use of their vessel. They were advised that their prospects of obtaining an injunction were minimal, the vessel would not have been released unless the payment was made, and they sought recovery of the money with sufficient speed once the duress had terminated."

 

The real issue in the appeal is, therefore, as to the second element in the wrong duress: was the pressure applied by the ITF in the circumstances of this case one which the law recognises as legitimate? For, as Lord Wilberforce and Lord Simon of Glaisdale said in Barton v Armstrong: "the pressure must be one of a kind which the law does not regard as legitimate."

 

As the two noble and learned Lords remarked, in life, including the life of commerce and finance, many acts are done "under pressure, sometimes overwhelming pressure": but they are not necessarily done under duress. That depends on whether the circumstances are such that the law regards the pressure as legitimate.

 

In determining what is legitimate two matters may have to be considered. The first is as to the nature of the pressure. In many cases this will be decisive, though not in every case. And so the second question may have to be considered, namely, the nature of the demand which the pressure is applied to support.

 

The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress can, of course, exist even if the threat is one of lawful action: whether it does so depends upon the nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful, eg to report criminal conduct to the police. In many cases, therefore, "What [one] has to justify is not the threat, but the demand...": see per Lord Atkin in Thorne v Motor Trade Association.

 

The present is a case in which the nature of the demand determines whether the pressure threatened or applied, ie the blacking, was lawful or unlawful. If it was unlawful, it is conceded that the owner acted under duress and can recover. If it was lawful, it is conceded that there was no duress and the sum sought by the owner is irrecoverable. The lawfulness or otherwise of the demand depends upon whether it was an act done in contemplation or furtherance of a trade dispute...

 

For these reasons I conclude that the demand for contributions related to the terms and conditions of employment on the ship, and, if it had been resisted by the owner, would have led to a trade dispute. Blacking the ship in support of the demand was... accordingly, a legitimate exercise of pressure and did not constitute duress. The owner cannot recover the contributions.