#6771 - Ctn Cash And Carry Ltd V. Gallaher - Restitution of Unjust Enrichment BCL

CTN Cash and Carry Ltd v. Gallaher

Facts

The plaintiff company ran a cash and carry business from warehouses in six towns in the north of England. A feature of the business was the sale of cigarettes, which they purchased in consignments from the defendant distributors. The defendants were not contractually bound to sell cigarettes to the plaintiffs and each sale was under a separate contract on the defendants' standard terms of business. The defendants had also arranged credit facilities for the plaintiffs, which they had absolute discretion to withdraw. In November 1986 the manager of one of the plaintiffs' warehouses placed an order for a consignment of cigarettes at a price of 17,000. By mistake, the defendants delivered the goods to the wrong warehouse. The parties subsequently agreed that the defendants would arrange for the transfer of the goods to the warehouse which had placed the original order, but before that could happen the entire consignment of cigarettes was stolen from the plaintiffs' premises. The defendants, believing that the goods had been at the plaintiffs' risk at the time of the theft, invoiced them for the price of the stolen goods. The plaintiffs initially rejected the invoice, but later paid it after the defendants had made it clear that unless they did so their credit facilities would be withdrawn.

Note: The defendants were apparently the sole distributors in England of popular brands such as Silk Cut and Benson & Hedges.

Holding

Same test of duress applies to avoiding a contract: It seems to me not to matter whether the correct analysis of the facts is that an agreement was made that the plaintiffs would pay the sum in question or whether payment is to be regarded simply as a unilateral act of the plaintiffs. In either event the claim must succeed if the case of duress is made out; if that case is not made out, the claim must fail.

Monopoly Position: The dispute arises out of arm's length commercial dealings between two trading companies. It is true that the defendants were the sole distributors of the popular brands of cigarettes. In a sense the defendants were in a monopoly position. The control of monopolies is, however, a matter for Parliament. Moreover, the common law does not recognise the doctrine of inequality of bargaining power in commercial dealings (see National Westminster Bank plc v Morgan [1985] 1 All ER 821, [1985] AC 686). The fact that the defendants were in a monopoly position cannot therefore by itself convert what is not otherwise duress into duress.

Lawful action by the Defendant: A second characteristic of the case is that the defendants were in law entitled to refuse to enter into any future contracts with the plaintiffs for any reason whatever or for no reason at all. Such a decision not to deal with the plaintiffs would have been financially damaging to the defendants, but it would have been lawful. A fortiori, it was lawful for the defendants, for any reason or for no reason, to insist that they would no longer grant credit to the plaintiffs. The defendants' demand for payment of the invoice, coupled with the threat to withdraw credit, was neither a breach of contract nor a tort.

Good Faith Claim made by the Defendant: A third, and critically important, characteristic of the case is the fact that the defendants bona fide thought that the goods were at the risk of the plaintiffs and that the plaintiffs owed the defendants the sum in question. The defendants exerted commercial pressure on the plaintiffs in order to obtain payment of a sum which they bona fide considered due to them. The defendants' motive in threatening withdrawal of credit facilities was commercial self-interest in obtaining a sum that they considered due to them.

Given the combination of these three features, I take the view that none of the cases cited to us assist the plaintiffs' case…. I...