Economic Duress in the Supreme Court

23 August, 2021

On Wednesday 18 August the Supreme Court handed down its judgment in Times Travel (UK) Limited v Pakistan International Airlines Corp [2021] UKSC 40 concerning economic duress.

Pakistan International Airlines Corp (PIAC) was the national flag carrier airline of Pakistan and, at the relevant time, operated the only direct flights between Pakistan and the UK. Times Travel (TT) ran a travel agency focused on serving its local Pakistani community. A dispute regarding TT’s commission emerged, and in September 2012 PIAC gave a fortnight’s notice to TT that it would exercise its contractual right to terminate their old agency agreement. Enclosed with the notice was a proposed new agency agreement. That not only set a new and less generous basis for calculating commission in the future, but also required TT to give up any accrued rights for commission under the old agreement. Three days later, PIAC applied further pressure by exercising its contractual rights to reduce ticket allocations to the TT. TT signed the new agreement, but later sought to set aside the contract on the basis of duress.

At first instance, Warren J held that the contract was voidable for duress, even though PIAC’s threats not to continue dealing with TT were entirely lawful. That decision was overturned by the Court of Appeal, and the Supreme Court unanimously dismissed TT’s appeal.

The Justices emphasised that PIAC’s pursuit of its own commercial self-interest was justified, and that the pressure applied by PIAC was not illegitimate. However, the Supreme Court also recognised that in rare instances economic duress may be established even where the pressure applied was lawful. Lord Hodge (with whom Lord Reed, Lord Lloyd-Jones and Lord Kitchin agreed) held that “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”. By contrast, Lord Burrows thought that “it is a necessary requirement for establishing lawful act economic duress that 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.” The split between the Justices demonstrates the difficulties inherent in limiting the scope of lawful act economic duress.

A copy of the judgment can be found here.

Professor Paul Davies acted for PIAC (with Nigel Jones QC and Thomas Bell), instructed by James Sherratt of Farani Taylor solicitors. Paul’s case note (with William Day) on the Court of Appeal decision in the Law Quarterly Review was cited by Lord Burrows, and praised as “excellent”. Paul’s work on duress, and the limits of contract law more generally, has also recently been relied upon by the New Zealand Court of Appeal in Dold v Murphy [2020] NZCA 313 [69], [77]-[78].